Some important points relating to CTS-2010

1. The Reserve Bank has implemented CTS in the National Capital Region (NCR), New Delhi, Chennai and Mumbai with effect from February 1, 2008, September 24, 2011 and April 27, 2013 respectively.

2. The cheque images can be Black & White, Gray Scale or Coloured, 

 Black & White images are light in terms of image-size, but do not reveal all the subtle features that are there in the cheques,

 Coloured images are preferable, but they increase storage and network bandwidth requirements,

 Gray Scale images are mid-way and most preferable,

 CTS in India use a combination of Gray Scale and Black & White images.

 There are three images of each cheques that need to be taken - front Gray Scale, front Black & White and back Black & White.

3. Customers should use image-friendly coloured inks while writing cheques and avoid any alterations / corrections thereon.

4. Images that do not meet the specifications are rejected.

5. The security, integrity, non-repudiation and authenticity of the data and image transmitted from the paying bank to the payee bank are ensured using the Public Key Infrastructure (PKI).

6. The PKI standards used are in accordance with the appropriate Indian acts and notifications of Controller of Certifying Authority (CCA).

7. CTS is compliant to the requirements of the Information Technology Act, 2000.

8. It has been made mandatory for the presenting bank to sign the images and data from the point of origin itself.

9. Under CTS the physical cheques are retained at the presenting bank level and do not move to the paying banks.

Benefits of CTS

(i) CTS speeds up the process of collection of cheques,

(ii) Reduces the scope for clearing-related frauds or loss of instruments in transit,

(iii) Lowers the cost of collection of cheques,

(iv) Removes reconciliation-related and logistics-related problems,

(v) Reduces the time of clearing cycle – that is faster processing of cheques and payment in favour of the customer,

(vi) Reduces scope for frauds inherent in paper instruments,

Thus, as you can see CTS increases efficiency of the entire system.

What is CTS -2010?

CTS-2010 is a standard benchmark recommended by RBI for the standardisation of:

(i) cheque forms (leaves) in terms of size,

(ii) MICR band,

(iii) quality of paper, having protection against alteration, should be sensitive to acid/alkali/bleach etc. and should not glow under UV light – CTS -2010 paper is UVdull!

(iv) watermark, all cheques to carry a standardized watermark, ‘CTS INDIA’ – should be oval and 2.6 to 3 cms in diameter,

(v) mandating colour schemes in pastels to ensure clarity of image etc.,

QUALITATIVE TOOLS

1. LTV(Loan to Value Ratio) : Suppose I have Land Worth Rs 1 Crore and I want to get Loan from Bank by Mortgaging that Land. Then I will Not get Rs 1 Crore Loan . If LTV=60% then I can Get Maximum Loan of Rs 60 Lakh.

2. Moral Suasion : Moral Suasion is just as a request by the RBI to the commercial banks to take so and so action and measures in so and so trend of the economy. RBI may request commercial banks not to give loans for unproductive purpose which does not add to economic growth but increases inflation. Rajan will try to influence those bankers through direct meetings, conference, giving media statements, giving speeches etc

3. Credit Ceiling: In this operation RBI issues prior information or direction that loans to the commercial banks will be given up to a certain limit. In this case commercial bank will be tight in advancing loans to the public. They will allocate loans to limited sectors. Few example of ceiling are agriculture sector advances, priority sector lending.

4. Credit Authorization Scheme: Under this instrument of credit regulation RBI as per the guideline authorizes the banks to advance loans to desired sectors 

5. Direct action : Means RBI gives punishment to notorious banks for not abiding by its guidelines. Punishment can involve: penal interest, refuses to lend them money and in worst case even cancels their banking license.

Reverse Repo(Repurchase) Rate

Rate at which RBI borrows money from commercial banks. When Banks have collected More Money from Public but Demand for Loans is Less then Banks mostly park their Money with RBI and Receives Interest(Reverse Repo Rate). Reverse Repo Rate is Dependent on Repo Rates as Reverse Repo Rate is set to Repo Rate -1%. RBI gives Government Securities as Collateral to Banks. Current rate is 6.75%

Officially Repo and Reverse Repo Rates Percentages are in Basis Points. So 1% means 100 Basis Points.

Marginal Standing Funding

By this mechanism commercial banks can get loans from RBI for their emergency needs. Under the Marginal Standing Facility (MSF), currently banks avail funds from the RBI on overnight basis against their excess SLR holdings.

Additionally, they can also avail funds on overnight basis below the stipulated SLR up to two per cent of their respective Net Demand and Time Liabilities (NDTL) outstanding at the end of second preceding fortnight.

With a view to enabling banks to meet the liquidity requirements of mutual funds under the RBI’s Special Repo Window announced on July 17, 2013, it has been decided to raise the borrowing limit below the stipulated SLR requirement under the MSF from 2 per cent of NDTL to 2.5 per cent of NDTL. This Facility is only

Available to Scheduled Commercial Banks. Under This Facility Banks can use securities from SLR quota. MSF Rate = Repo Rate +1%. Current is 8.75% 

Statutory Liquidity Ratio

Every financial institution has to maintain a certain quantity of liquid assets with themselves at any point of time of their total time and demand liabilities. These assets can be cash, precious metals, RBI approved securities like bonds, Shares etc. The ratio of the liquid assets to time and demand liabilities is termed as the Statutory liquidity ratio.

Some profits are earned through SLR by banks depending upon the asset. It is defined under Sec 24 of Banking Regulation Act 1949. It is maintained on daily basis by Banks.

Penalty for Not Maintaining SLR can be 3% above Bank Rate.

Its Minimum and Maximum value(can be 40%) is the discretion of RBI. It is maintained on Daily Basis. At Present The SLR is 22%. By Increasing SLR the Money Supply can be Reduced in Market thereby Controlling Inflation(Dear Money Policy) and by Decreasing it Money Supply can be Increased thereby promoting

Growth(Cheap Money Policy)

Repo(Repurchase) rate

It is the rate at which RBI lends money to commercial banks against securities in case commercial banks fall short of funds for Short Term. But Remember The banks cannot get money by mortgaging SLR quota securities to get money from RBI. It has

to have securities above the SLR quota to Buy Money. This rate is also known as “Policy Rate”under LAF(Liquidity Adjustment Facility).