The CTS infrastructure upgraded in the month of December, 2018 (completion of all 3 grids) with Centralised Clearing House functionality.
The new architecture, Centralised Clearing House (CH), will enable direct connectivity from capture system to centralised CH through a component named Date Exchange Model (DEM). DEM will replace the existing CHI. DEM will primary facilitate signing, encryption and data exchange between the capture and CCH.
The new architecture will facilitate co-existence of CHI and DEM, the banks may opt either for CHI or DEM depending on their internal system architecture and the life span of existing CHIs not later than March 2020.
DEM will be with open technical specifications, banks can develop DEM either internally or through their preferred vendor. Banks should have adequate arrangements with the DEM service provider for maintenance. As DEM will be built / procured by the banks independently the Clearing House will not have any role in DEM related maintenance or issue resolution activities.
The banks will be allowed to switch to DEM subject to the following conditions
a) Banks should undergo certification for DEM
b) It is compulsory for a bank to set up 2 DEMs (Active-Active) in each Grid so that PR / DR set up will be available from day 1.
c) Banks should perform Vulnerability Assessment Penetration System (VAPT) on their DEM infrastructure and to confirm closure of observations if any.
d) Sponsor banks should migrate to DEM along with their sub-member / Indirect banks.
e) In a GRID the bank will use either CHI or DEM, there is no option to have both the models in the same GRID.
53 f) As a fall back mechanism banks should continue to maintain CHI for at least 3
months even after moving to DEM,
With the introduction of DEM, the activities carried out at CHI will be split between the Centralised Clearing House (CCH) and DEM. The details of the activities currently performed by CHI and the split of these activities between DEM and the CCH are as given below:
Processing Step CHI CH DEM CCH Remark
PKI Key Management
Key Exchange between banks and CH CHI uses file based interface i.e.
WCS. DEM uses messaging over Receiving Capture Interface files from
Capture (CXF/CIBF/RRF)
Signing and encryption of outward files
to CH FDD for CHIs and Capture
interface files for DEM
Transmit outward files to CH
Confirm delivery of outward files to CH
Make acknowledgement available to
Capture
Perform instrument level business
validation The business validations are
repeated at CH and result at CH is the final. With CCH, it will be done only at CH hence removes duplication
Perform instrument level IQA validation This facilitates central monitoring on the IQA rejections and rejection reason analysis Performs duplicate detections based on
UDK(Unique Document key) Today repeated at CH. CCH does it once.
Accept files (data and image) from the capture systems and generate acknowledgement
Sorting and batching of instruments
(AKA bundling)
54
Processing Step CHI CH DEM CCH Remark
Identify appropriate session for the
batches This check is repeated at CH
today. Hence removes duplication
Create outward exchange files (FDD) FDDs are not created in CCH model, capture interface files are sent to CH as is
Transmission of inward files to bank Currently, CH pushes the inward files to CHIs. With CCH, DEM will pull the files pertaining to resp.
bank. This is to reduce the transmission load and complexity at CH
Receive inward data from CH Not required as no FDDs
Validate signature and decrypt
Create inward files for Capture (Posting
files) PSF/PIBF are generated at CCH
Make Posting files available to Capture
System
DR related operations
Identify DR switch over CH sends HTTP message to CHIs
and then creates reconciliation file as a separate step. CCH creates a DR data which includes reconciliation data as well which is pulled by DEM. This Clearing House Table (CHT) creation CHT is not created with CCH
CHT loading at banks Not required
55
Processing Step CHI CH DEM CCH Remark
Creation of Clearing House Masters
(CHM) for Capture System CH directly creates CHM instead of CHT
2. Conducting the Paper to Follow (P2F) session 3. Session monitoring
4. Settlement generation and posting 5. Reporting
6. Extension marking 7. Bank exclusion 8. Unwinding
9. Clearing house master maintenance 10. DEM master maintenance
Banks:
1. Identification of centres to have DEM setup 2. DEM registration process at NPCI
3. Procurement/ Renewal of class 3 certificate 4. Establish network connectivity to clearing house
5. To have a DR DEM set up with similar version of PR DEM 6. Delivery of files through media during network failure
7. Scanning and processing of instruments with in stipulated session timings 8. Return marking in DEM/CCH
9. Representation of rejected instruments with necessary corrections 10. Segregation of P2F instruments and participation in P2F session 11. Reconciliation of instruments with NPCI reports on daily basis 12. Approach respective RBI RO for extension.
Roles and responsibilities – Technical NPCI:
1. Index Rebuilding
2. REDO application DR Database
3. Archive, CPPS and BNS reconciliation 4. Server Disk space monitoring
56 5. Server Memory utilization monitoring
6. Server CPU utilization monitoring 7. Application SOD – EOD
8. Inward jobs monitoring 9. Archival jobs Monitoring 10. System clean-up jobs
11. Daily Backup L0 and moving to Tape 12. Application monitoring
13. Certificate trusting and mapping 14. MS Patch and Application patch update
15. Periodic (Once in each quarter) & surprise DR Drills.
Banks:
1. User Access Management
2. DEM Monitoring for incoming and outgoing files.
57
Annexure I
Legal status for Cheque Truncation
Legal status for Cheque Truncation derives from the amendments that were made to the Negotiable Instruments Act, 1881. The following are the relevant clauses of the amended NI Act -
Section 6
‘6. “Cheque” - A “cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.
Explanation I. - For the purposes of this section, the expression -
(a) “a cheque in the electronic form” means a cheque which contains the exact mirror image of a paper cheque, and is generated, written and signed in a secure system ensuring the minimum safety standards with the use of digital signature (with or without biometrics signature) and asymmetric crypto system;
(b) “a truncated cheque” means a cheque which is truncated during the course of a clearing cycle, either by the clearing house or by the bank whether paying or receiving payment, immediately on generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing.
Explanation II - For the purposes of this section, the expression “clearing house” means the clearing house managed by the Reserve Bank of India or a clearing house recognised as such by the Reserve Bank of India.’.
Section 64
Amendment of section 64 - Section 64 of the principal Act shall be re- numbered as section (1) thereof, and after section (1) as so re- numbered, the following sub-section shall be inserted, namely:-
“(2) Notwithstanding anything contained in section 6, where an electronic image of a truncated cheque is presented for payment, the drawee bank is entitled to demand any
58 further information regarding the truncated cheque from the bank holding the truncated cheque in case of any reasonable suspicion about the genuineness of the apparent tenor of instrument, and if the suspicion is that of any fraud, forgery, tampering or destruction of the instrument, it is entitled to further demand the presentment of the truncated cheque itself for verification:
Provided that the truncated cheque so demanded by the drawee bank shall be retained by it, if the payment is made accordingly.”
Section 81
Amendment of section 81 - Section 81 of the principal Act shall be re- numbered as section (1) thereof, and after section (1) as so re- numbered, the following sub-sections shall be inserted, namely:-
“(2) Where the cheque is an electronic image of a truncated cheque, even after the payment the banker who received the payment shall be entitled to retain the truncated cheque.
(3) A certificate issued on the foot of the printout of the electronic image of a truncated cheque by the banker who paid the instrument, shall be prima facie proof of such payment.”
Section 89
Amendment of section 89 - Section 89 of the principal Act shall be re- numbered as section (1) thereof, and after section (1) as so re- numbered, the following sub-sections shall be inserted, namely:-
“(2) Where the cheque is an electronic image of a truncated cheque, any difference in apparent tenor of such electronic image and the truncated cheque shall be a material alteration and it shall be the duty of the bank or the clearing house, as the case may be, to ensure the exactness of the apparent tenor of electronic image of the truncated cheque while truncating and transmitting the image.
59 (3) Any bank or a clearing house which receives a transmitted electronic image of a truncated cheque, shall verify from the party who transmitted the image to it, that the image so transmitted to it and received by it, is exactly the same.”
Section 131
Amendment of section 131 - In section 131 of the principal Act, Explanation shall be re-numbered as Explanation I thereof, and after Explanation I as so re-re-numbered, the following Explanation shall be inserted, namely:- “Explanation II. - It shall be the duty of the banker who receives payment based on an electronic image of a truncated cheque held with him, to verify the prima facie genuineness of the cheque to be truncated and any fraud, forgery or tampering apparent on the face of the instrument that can be verified with due diligence and ordinary care.”.
All the other related laws including the Bankers’ Book Evidence Act and the IT Act have been amended along with the Negotiable Instruments Act to support the cheque truncation process viz. enabling the banker to pay or reject the images of the cheques in lieu of the physical paper.
60
Annexure II
Special Crossing
Special Crossing Stamp and CLEARED Stamp
(i) Dimension of Special Crossing Stamp
Two parallel lines of length up to 2 inches at a distance of 1/2 inch in between them. The name of the bank and MICR Code of the branch to be incorporated in the enclosed space.
(ii) Position of Special Crossing Stamp
Preferably at the lower middle portion with a slanting of 60 degrees to the base for Special Crossing Stamp. And horizontally just above MICR line at the lower middle portion for CLEARED Stamp.
(iii) Suggested specimen of Special Crossing Stamp and CLEARED Stamp
(iv) Additional Safeguard
The crossing stamp should be affixed in such a manner that to the extent possible it does not deface any material information such as the name of the payee, `A/C payee' crossing, etc., made by the customer.
61
Annexure III
Return Reason Codes
Code No. Reason for Return
(01-03) Funds
Return Reason Code Reason
1 Funds insufficient
2 Exceeds arrangement
3 Effects not cleared, present again.
(04-09) Reference to Drawer
Return Reason Code Reason
4 Refer to drawer
5 Kindly contact Drawer/ Drawee Bank and please present again (10-19) Signature
Return Reason Code Reason
10 Drawer’s signature incomplete 11 Drawer’s signature illegible 12 Drawer’s signature differs 13 Drawer’s signature required
14 Drawer’s signature not as per mandate
15 Drawer’s signature to operate account not received 16 Drawer’s authority to operate account not received 17 Alteration require drawer’s authentication
62 (20-29) Stop Payment
Return Reason Code Reason
20 Payment stopped by drawer
21 Payment stopped by attachment order 22 Payment stopped by court order
23 Withdrawal stopped owing to death of account holder 24 Withdrawal stopped owing to lunacy of account holder 25 Withdrawal stopped owing to insolvency of account holder
(30-49) Instrument
Return Reason Code Reason
30 Instrument post dated
31 Instrument out dated / stale
32 Instrument undated / without proper date 33 Instrument mutilated; requires Bank’s guarantee
34 Cheque irregularly drawn / amount in words and figures differ 35 Clearing House stamp / date required
36 Wrongly delivered / Not drawn on us 37 Present in proper zone
38 Instrument contains extraneous matter 39 Image not clear, present again with paper
40 Present with document
51 Account transferred to another branch
52 No such account
53 Title of account required
54 Title of account wrong / incomplete
55 Account blocked (situation covered in 21-25)
63 (60-69) Crossing / Endorsement
Return Reason Code Reason
60 Crossed to two banks
61 Crossing stamp not cancelled 62 Clearing stamp not cancelled
63 Instrument specially crossed to another bank 64 Amount in protective crossing incorrect
65 Amount in protective crossing required/ illegible 66 Payee’s endorsement required
67 Payee’s endorsement irregular / requires collecting bank’s confirmation
68 Endorsement by mark / thumb impression requires attestation by Magistrate with seal.
(70-79) RBI / Government
Return Reason Code Reason
70 Advice not received
71 Amount / Name differs on advice
72 Drawee bank’s funds with sponsor bank insufficient 73 Payee’s separate discharge to bank required
74 Not payable till 1st proximo
75 Pay order / cheque requires counter signature 76 Required information not legible/ correct
64 (80-99) Miscellaneous
Return Reason Code Reason
80 Bank’s certificate ambiguous / incomplete / required
81 Draft lost by issuing office / confirmation required from issuing office
82 Bank/ Branch blocked
83 Digital Certificate Validation failure 84 Other reason- connectivity failure
85 Alterations on Instrument - Other than “Date” field (Alteration/correction on instruments are prohibited under CTS)
86 Fake/Forged/Stolen Draft/cheque/cash order/interest warrant/dividend warrant
87 Payee's a/c credited- Stamp required
88 Other reason
92 Bank Excluded
65
Annexure IV
Rescheduling of items
Different cases of handling items not attached to session are as under -
Session is closed when item reaches the CHI from capture system
Transaction with one Clearing Type came to the Presenting Bank CHI from the capture system. No Session was open for that Clearing Type. The transaction shall have the following status on CHI “Awaiting Session”. The transaction shall reside in the CHI and will automatically get attached to next available clearing session with same Clearing Type. In case the bank wants to present the item/s in another session (with a different clearing type) and if the item satisfies requirement of that Clearing Type, the operator shall have to delete the item manually. Once the item is deleted at the CHI, an Auto Response File gets generated and shall be available to Capture for Pull. The Capture system of the bank shall then have to import the Response File and Re-Scan the instrument, change the endorsement and resubmit the transaction with the other Clearing Type.
Session is closed when item reaches the CH from CHI
CH shall reject the bundle and send it back to Presenting Bank CHI. In such a situation, the CHI will need to un-build the exchange file, and reattach to a new session. The bank may take appropriate action as explained in para above.
Session is closed when item reaches the CH from DEM
The items which are pushed beyond session timings then same will be in queue at CCH and it will be tagged to upcoming presentment session and banks should vouch the entries in Core banking solution accordingly.
Banks should monitor input out monitor screen to ascertain whether the cheques are tagged to current session or queued for the next session and perform reconciliation accordingly.
66
Annexure V
Illustrative time-line drawing of the clearing cycle for CTS in Southern Grid Bankers’ Clearing House (SG-BCH)
Weekdays and Saturdays (1st, 3rd and 5th)
Session No Session Type Weekdays (2nd & 4th
Saturday holiday) Timing
1 Presentation Monday – Saturday 15:30 hours to 19:30 hours
3 Return Monday - Saturday 12:00 hours to 14:30 hours
Saturdays including 2nd and 4th Saturday of month No Presentation and Return session
Note: Paper to follow (P2F) documents to be dropped in the Clearing House as per specified timings below
Centre Session Weekdays Timing
MICR Presentation &
Return Monday – Saturday 20:30 hours to 21:00 hours (on same day) Non-MICR Presentation &
Return Monday - Saturday 08:00 hours to 08:30 hours (next day)
Droppings in the boxes / Physical Exchanges of P2F to be regulated under supervision by NPCI
The timeline is illustrative in nature. The actual timelines will be as prescribed by the Clearing House.
Wee k da y /Saturday
Pre s entati o n Wee k day / Saturday R e turn
AM 09:00 10:00 11:00 11:30 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 19:30 20:00 21:00 PM
67
Annexure VI
RBI Circular on Dispute Resolution Mechanism
RBI/2010-11/213
DPSS.CO.CHD.No.654/03.01.03/2010-2011 September 24, 2010
The Chairman and Managing Director / Chief Executive Officer
System Providers and System Participants of All Authorised Payment Systems
Madam / Dear Sir
Dispute Resolution Mechanism under the Payment and Settlement Systems Act, 2007
References are being received from system providers and system participants of payment systems seeking clarity, scope and uniformity while dealing with clearing and settlementrelated disputes in various payment systems. Speedy and timely resolution of disputes is required for ensuring smooth conduct of payment system operations, providing the requisite authority to the system provider, fixing accountability for failure to adhere to expected discipline, penalising disruptive behaviour, etc. The absence of a structured and formal dispute redressal framework acts as a hindrance in the timely resolution of disputes between system participants, between system participants and the system provider, between the system providers, etc., apart from lacking necessary requirements of transparency and uniformity in such situations.
2. Enactment of the Payment and Settlement Systems Act, 2007 (PSS Act) provides the legal backing for putting in place a formal dispute resolution framework. A Dispute Resolution Mechanism has accordingly been drawn up (enclosed) for adherence by system providers and system participants of all Payment Systems authorised to operate in the country.
3. Scope of the Dispute Resolution Mechanism will generally be limited to interpretation, scrutiny and resolution of disputes within the ambit of rules, regulations, operational and procedural guidelines relating to the payment products, various instructions issued by the system providers, instructions and directions issued by RBI, etc., from time to time.
4. Use of the mechanism will not be resorted to deal with aspects relating to acts of system participants (or providers) that are prima-facie fraudulent or are internal to their operations or outside the payment and settlement system infrastructure.
68 5. The Dispute Resolution Mechanism will also not cover disputes between system participants
and their customers (ultimate users), between members of the payment systems and their sub-members or between sub-members themselves.
6. These instructions are being issued under the powers conferred on the Reserve Bank of India by the PSS Act (Act 51 of 2007). All Authorised Payment System Providers are hereby directed to put in place the Dispute Resolution Mechanism within three months from the date of this circular.
Enclosure to Circular DPSS.CO.CHD.No. 654 / 03.01.03 / 2010-2011 Dated September 24, 2010
Dispute Resolution Mechanism
The Dispute Resolution Mechanism for all payment systems, in line with the provisions of the Payment and Settlement Systems Act, 2007 (PSS Act), is advised as under –
1. For all Clearing House-related activities, including paper (cheques) and retail electronic (ECS) payment products -
a. All Clearing Houses shall constitute a “Panel for Resolution of Disputes” (PRD) consisting of five members - four members (system participants) from the Standing Committee of the Clearing House and the President of the Clearing House - to look into all the clearing-related disputes. The four system participants shall be different from the system provider (bank managing the Clearing House).
b. The PRD shall be chaired by the President of the Clearing House.
c. In case of specific disputes involving system participants that are members of the PRD, the members concerned shall be replaced by other system participants for the limited purpose of looking into the specific dispute.
d. The PRD shall dispose of the dispute within 15 working days of submitting the dispute.
e. At Clearing Houses where there are fewer members (system participants), five or less in
e. At Clearing Houses where there are fewer members (system participants), five or less in