An old RBI rule will come into force after January 1st, 2019 and you should be prepared. A very big change is about to hit the Indian banking sector, as a particular type of cheques faces permanent ban after January 1st, 2019. But no need to panic – We will tell you exactly what you should do now.
Indian Rupee is now slowly but gradually emerging as a strong alternative to the Dollar. The Indian Rupees has been under pressure since some time now, as the value of the dollar is increasing, so are import costs and cost of raw petroleum. From the low of Rs 63.27 in July, USD to INR conversion touched Rs 74.59 in October, and entire India was worried.
Your Cheques Can Be Permanently Banned After January 1, 2019: This Is What You Should Do
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Non-CTS Cheques Will Be Banned
December 31st is the last day of using Non-CTS cheques for account holders of all banks including SBI (State Bank of India), HDFC, Punjab National Bank, ICICI, Bank of Baroda and others. Non-CTS cheques have been banned by RBI starting January 1, while these cheques will be invalid for customers of SBI from December 12.
RBI had issued a notice about three months ago, stating that Non-CTS cheques will be regarded as invalid starting January 1. Following this, HDFC had sent out a circular to notice its customers regarding discontinuation of separate sessions for clearance of non-CTS cheques. Similarly, the Punjab National Bank informed their customers to replace their non-CTS compliant cheques.
What is CTS?
CTS is the abbreviation of Cheque Truncated System, which in simple terms means stopping the physical transport of cheques midway. Instead, an electronic image is generated for transmission of the amount, thus truncating the journey of the cheque by the Clearing House.
Why are Non-CTS cheques banned?
RBI’s procedural guidelines stated that cheque clearing systems involved physical movement of the cheque from one bank to another thus elongating the overall process of encashing the cheques at each stage of the clearing cycle. Also, as per a restrictive clause in the Negotiable Instruments Act, 1881, the cheques were required to be presented at the drawee branch for clearing.
The RBI says, “With suitable amendments to The Negotiable Instruments (NI) Act, 1881, The Information Technology (IT) Act, 2000 and The Bankers’ Book Evidence (BBE) Act, 1891, the legal framework was put in place for the introduction of cheque truncation and e-cheques in India.”
What steps are to be taken now?
SBI customers should encash any Non-CTS cheques before December 12, customers of other banks can encash before December 31.
Every account holder must deposit their non-CTS cheques and cheque books in their respective branch and get new cheque leaves or books as per the new CTS 2010 standard. Remember, the new cheque books are free of cost.
In the years to come, keeping in mind the cost overheads, banks will probably ban the usage of cheques altogether. It looks like banks have taken a progressive step forward with the goal of digital, cashless India in mind.
All Cheques Will Be Banned In India?
Last year around the same time, we had reported a possibility: Cheques can be altogether banned in India, under Digital India push.
However, cheques are still pretty much active in India, and an important financial tool as well.
Dollar Discarded: Now Shop In Dubai Using Indian Rupees; Iran Will Sell Oil Using Rupee Payment
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The value of the dollar has now come down, but still, it is hovering around the Rs 70-Rs72 mark, which is indeed alarming. So, what is the solution then?
Omitting dollar in business transactions, and relying on INR does seem to be a feasible solution. And two very important updates have come in regarding this.
Welcome to the new age of a strong Rupees!
Shop in Dubai Using INR
This week, UAE and India signed a very crucial currency swap agreement, amounting to Dh2 billion or 35 billion Indian rupees, which will not only help these two countries to build their ties, but also make Rupees stronger.
UAE’s minister of foreign affairs and international cooperation, Shaikh Abdullah Bin Zayed Al Nahyan met with Sushma Swaraj, India’s Minister of External Affairs in Abu Dhabi and announced this mega cooperation.
As part of this currency exchange program, Indians can now shop in Dubai using INR: Hence, there is no need to convert currency into dollars or dirham to do shopping in Dubai anymore.
Also Read: Fly To Dubai From Mumbai Underwater – High-Speed Rail Planned To Exchange Water, Oil
Indian Embassy in Dubai said, “The bilateral currency swap agreement between India and UAE is expected to reduce the dependency on hard currencies like US dollar,”
This move will make trading between UAE and India more seamless, easy, and also remove the high transaction cost pertaining to USD conversion, and avoid the volatility of the forex market.
India and UAE’s bilateral ties stand at $54 billion, and non-oil trade is $34 billion. While Indians pumped in $6.6 billion into UAE as FDI last year, UAE’s FDI into India was $5.8 billion.
We can expect the trade ties between India and UAE to grow further, after this currency exchange agreement.
Iran Will Accept INR For Oil Payments
Meanwhile, within 24 hours after the currency swap between UAE and India was announced, India has scored another major win for INR in the Middle East.
India and Iran have now signed a pact, based on which, Iran will accept payments for oil purchased by India in INR.
This is a major news, because till now, India paid to Iran using euros, and a strong dollar against Rupees meant huge overheads.
Now on, India can pay for the oil directly into the UCO Bank account of the National Iranian Oil Co (NIOC).
India is right now Iran’s 2nd largest purchaser of crude oil after China and purchases 1.25 million tonne or 15 million tonne in a year (300,000 barrels a day).
Iran is World’s 3rd largest supplier of crude oil after Iraq and Saudi Arabia, and India is the world’s third-biggest oil consumer, as it meets 80% of its oil needs via imports.
We are consulting with financial experts, and trying to understand whether this trade of oil via INR will lead to cheaper oil prices in India or not.
We will keep you updated. Do you think that cheques are losing its relevance in this age of mobile wallets and UPI? Do share your opinions by commenting right here!
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