What changed
RBI observed banks still taking fresh cheques (both CTS-2010 and non-CTS) in ECS-enabled locations, violating earlier March 2013 instructions. This circular re-emphasizes the ban on accepting any new PDC/EMI cheques in such areas and mandates conversion of existing ones to ECS mandates. It also clarifies that CTS-2010 cheques are only allowed where ECS is unavailable.
What it means for you
Banks must immediately stop accepting fresh PDC/EMI cheques in ECS-covered locations, reducing cheque processing costs and risks. The legal parity between ECS dishonour and cheque bounce under Section 138 of NI Act gives lenders sufficient recourse, so no need for dual instruments. This streamlines collections and aligns with digital payment goals.
What you must do
- Cease acceptance of any fresh PDC or EMI cheques in locations where ECS/RECS (Debit) is available.
- Convert existing PDC/EMI cheques in such locations into ECS mandates by obtaining fresh mandates from customers.
- Ensure no additional cheques are taken from customers beyond the ECS mandate, leveraging legal protection under PSS Act.
- In non-ECS locations, accept only CTS-2010 standard cheques.
- Communicate these instructions to all branches and loan processing units immediately.
Who it affects
All Scheduled Commercial Banks including RRBs, Urban Co-operative Banks, State Co-operative Banks, District Central Co-operative Banks, Local Area Banks
Can we still accept CTS-2010 cheques in ECS-enabled locations?
No. RBI explicitly prohibits accepting any fresh PDC/EMI cheques, whether in old format or CTS-2010 standard, in locations where ECS/RECS (Debit) facility is available.
What legal protection do we have if we only take ECS mandates?
Section 25 of the Payment and Settlement Systems Act, 2007 provides the same rights and remedies for dishonour of electronic instructions due to insufficient funds as are available under Section 138 of the Negotiable Instruments Act, 1881 for cheque bounce.
What should we do with existing PDC/EMI cheques in ECS locations?
Convert them into ECS/RECS (Debit) by obtaining fresh ECS mandates from customers. Do not retain or use the old cheques.