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With an aim to fasten the cheque clearing process, Reserve Bank of India had brought the concept of Cheque Truncation System (CTS) which allows banks to totally adopt the process of this system. Under this process, only CTS cheques will be allowed to be submitted in banks by customers. Moreover, this whole process of cheque clearance gets complete either on the same day or on the very next working day.
Now let’s try to find out more interesting things about this system.
As per RBI, Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point by the presenting bank en-route to the paying bank branch. In its place an electronic image of the cheque is transmitted to the paying branch through the clearing house.
In simple words, this system is introduced for quick clearance of cheque. It discontinues the flow of physical cheques issue by a drawer to the drawee branch. This ultimately eliminates the associated costs of movement of the physical cheques. It further reduces the time required for their collection and brings elegance to the entire activity of cheque processing.
Cheque Truncation System is an online image-based cheque clearing system which involves scanning of cheque images and subsequent electronic movement / replication of these images within the system for processing and clearing of cheques.
RBI first introduced this system in National Capital Region of India and New Delhi from 1 February 2008 with ten pilot banks. The deadline for which was set as 30th April, 2008 for all the banks to acquire this system. After this, it was launched in Chennai on 24tn September, 2011. Before the introduction of Cheque Truncation System, instruments used to get settled in MICR Clearing. In India, there were about 66 MICR centers which used to undertake clearing and settlement in their local geography. Moreover, the intra clearing was considered as outstation clearing.
Now, a new approach called Grid-based approach has been introduced to manage the entire cheque volume in India.
As mentioned above, a new approach called Grid-based approach has been introduced. The entire cheque volume of the country is now consolidated into three grids in New Delhi, Chennai and Mumbai.
Each grid provides processing and clearing services to all the banks under its respective jurisdiction. Banks, branches and customers based at small / remote locations falling under the jurisdiction of a grid would be benefitted, irrespective of whether there exists at present a formal arrangement for cheque clearing or otherwise. The jurisdictions of the three grids are indicated below:
National Capital Region of New Delhi, Haryana, Punjab, Uttar Pradesh, Uttarakhand, Bihar, Jharkhand, Rajasthan and the Union Territory of Chandigarh.
Maharashtra, Goa, Gujarat, Madhya Pradesh and Chhattisgarh.
Andhra Pradesh, Telangana, Karnataka, Kerala, Tamilnadu, Odisha, West Bengal, Assam and the Union Territory of Puducherry.
CTS have been implemented in New Delhi, Chennai and Mumbai with effect from February 1, 2008, September 24, 2011 and April 27, 2013 respectively. After migration of the entire cheque volume from MICR system to CTS, the traditional MICR-based cheque processing has been discontinued across the country.
Account holders get a lot of benefits in terms of:
Banks have various benefits from CTS which could be summarized as under:
Imaging of cheques can be based on various technology options. 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.
CTS 2010 is a cheque truncation system, an image-bound method, for faster clearing of cheques. Truncation means conversion of a physical cheque into electronic form. Moreover, as per RBI guideline, all banks providing cheque facility to their customers have been advised to issue only ‘CTS-2010’ standard cheques.
A specimen of a CTS Cheque is as follows:
Various Benefits of Grid Based CTS are as follows:
Banks can provide images of cheques duly certified or authenticated in case a person desires so. However, in case a person wants to see or get the physical cheque it would need to be sourced from the presenting bank for which a request has to be made to his/her bank. A cost may also be involved for this purpose. However, for the legal record, the presenting bank needs to preserve the physical instruments for a period of 10 years.
The process of CTS can be discussed as follows:
Cheque Truncation System (CTS) was introduced by the Reserve Bank of India (RBI) for faster clearing of cheques. This system is a move in the right direction and will ensure efficiency, security, transparency and faster credit of the funds which will benefit both the customer and the bank. This system seems to be a win-win situation for both the parties.
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