Cheque clearing to become safer, faster with pan-India CTS

Those who use cheques can expect clearing to become faster and safer across the country with the Reserve Bank of India (RBI) now planning to implement a pan-India Cheque Truncation System (CTS) from September 2020. Till now, CTS was only operational in major clearing houses, reports The Economic Times. 
 
In addition to operational efficiency, CTS offers several benefits to banks and customers, including human resource rationalisation, cost effectiveness, business process re-engineering, better service, adoption of latest technology, etc.
 
Benefits of Cheque Truncation System 
 
Cheque truncation speeds up the process of collection of cheques resulting in better service to customers, reduces the scope of loss of instruments in transit, lowers the cost of collection of cheques and removes reconciliation-related and logistics-related problems, thus benefitting the system as a whole, says the central bank. 
 
"With the other major products being offered in the form of real-time gross settlement (RTGS) and National Electronic Funds Transfer (NEFT), the Reserve Bank has created the capability to enable inter-bank and customer payments online and in near-real time. However, cheques continue to be the prominent mode of payments in the country. Reserve Bank of India has therefore decided to focus on improving the efficiency of the cheque clearing cycle. Offering CTS is a step in this direction," states RBI. 
 
What is Cheque Truncation System? 
 
Cheque Truncation System (CTS) 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, along with relevant information like data on the Magnetic Ink Character Recognition (MICR) band, date of presentation, presenting bank etc. Cheque truncation thus, obviates the need to move the physical instruments across bank branches, other than in exceptional circumstances for clearing purposes. According to RBI, this effectively eliminates the associated cost of movement of physical cheques and reduces the time required for their collection. 
 

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