The advent of CTS-2010 compliant cheques will make the existing cheques invalid from 31 July 2013. The customers who have deposited non-CTS cheques as post-dated cheques (PDCs) for EMIs to a finance company, or bank for repayment of a loan, will have to replace these with the compliant ones for instalments after 31 July. The non-compliant cheques will not be honoured by banks and will amount to non-payment and default on the part of the customer.
Compliance: The RBI has issued standards for the CTS-2010 cheque book, which can be accessed at http://tinyurl.com/c5aqc95.
ECS debit mandate: If the cheques are not CTS-2010 compliant, the customer will have to provide an ECS instruction to debit his bank account for the loan instalment. For this, ECS form has to be filled and submitted to the loan institution.
Documents: The signed ECS form, a copy of a cancelled cheque of the account from which the person wants the EMI instalment to be debited, and CTScompliant EMI cheques for 2-3 instalments (till the instruction is processed ) must be submitted.
Processing: The loan institution will accept the ECS instruction and the CTS-compliant PDC cheques, and will destroy the old non-compliant cheques.
Points to note
> A default on account of non-compliance will affect the credit score of the individual.
> In places where ECS facility is not available, the CTS-2010 compliant EMI cheques will have to be issued to the loan institution to replace the old cheques.
The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Sunita Abraham, Girija Gadre and Arti Bhargava.