Cheque Truncation System (CTS) in India- An Introduction & FAQs

INTRODUCTION

To improve the efficiency of the Cheque Clearing Cycle, Reserve Bank of India has decided to introduced Cheque Truncation System (CTS) in India. Further, Cheque Truncation is a more secure system than the current exchange of physical documents in which the cheque moves from one point to another, thus, not only creating delays but inconvenience to the customer in case the instrument is lost in transit or manipulated during the clearing cycle.

Cheque Truncation speeds up collection of cheques and therefore enhances customer service, reduces the scope for clearing related frauds, minimizes cost of collection of cheques, reduces reconciliation problems, eliminates logistics problems etc.

In addition to operational efficiency, Cheque Truncation has several benefits to the banks and customers which includes introduction of new products, re-engineering the total receipts and payments mechanism of the customers, human resource rationalization, cost effectiveness etc.,

The Cheque Truncation System (CTS) was implemented in the National Capital Region in February 2008. Cheque Truncation System (CTS) will be rolled out at Chennai. National roll-out of CTS will be considered once this project is operationalised.

Banknet’s Sixth Annual Conference on Payment Systems on 22nd January, 2010, Mumbai will focus on enhancing efficiency of paper based clearing system by Cheque Truncation System (CTS)... CLICK HERE

WHAT IS CHEQUE TRUNCATION

Truncation is the process of stopping the flow of the physical cheque issued by a drawer to the drawee branch. The physical instrument will be truncated at some point en-route to the drawee branch and an electronic image of the cheque would be sent to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting banks etc.

The images captured at the presenting bank level would be transmitted to the Clearing House and then to the drawee branches with digital signatures of the presenting bank. Thus each image would carry the digital signature, apart from the physical endorsement of the presenting bank, in a prescribed manner.

CRITERIA OF MEMBERSHIP



The criteria for banks participating in the Cheque truncation system are:

i. Membership of the clearing house in the NCR.

ii. Membership of the Indian Financial Network (INFINET)

In respect of banks who are not members of the INFINET, the following alternatives are available

(a) They may become the sub-members of the direct members or

(b) Such banks may use the infrastructure of the other banks having INFINET membership without being the INFINET members themselves and there clearing settlement can be done either directly or through the member through whom they are participating.

HOW CTS WORKS FOR BANK CUSTOMER;BENEFIT TO BANK CUSTOMERS... Click here

PROCESS FLOW OF CHEQUE TRUNCATION; INFRASTRUCTURE REQUIRED; IMAGE SPECIFICATIONS... Click here

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