Cheque Truncation System (CTS) or Image-based Clearing System (ICS), in India, is a project of the

Reserve Bank of India Reserve Bank of India, abbreviated as RBI, is the central bank of the Republic of India, and regulatory body responsible for regulation of the Indian banking system and Indian rupee, Indian currency. Owned by the Ministry of Finance (India), Min ...

(RBI), commenced in 2010, for faster clearing of cheques. CTS is based on a

cheque truncation Cheque truncation (check truncation in American English) is a cheque clearance system that involves the digitization of a physical paper cheque into a substitute electronic form for transmission to the paying bank. The process of cheque cleara ...

or online image-based cheque clearing system where cheque images and

magnetic ink character recognition Magnetic ink character recognition code, known in short as MICR code, is a character recognition technology used mainly by the banking industry to streamline the processing and clearance of cheques and other documents. MICR encoding, called the ...

(MICR) data are captured at the collecting bank branch and transmitted electronically.

Cheque truncation Cheque truncation (check truncation in American English) is a cheque clearance system that involves the digitization of a physical paper cheque into a substitute electronic form for transmission to the paying bank. The process of cheque cleara ...

means stopping the flow of the physical cheques issued by a drawer to the drawee branch. The physical instrument is truncated at some point in route to the drawee branch and an electronic image of the cheque is sent to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting banks etc. This would eliminate the need to move the physical instruments across branches, except in exceptional circumstances, resulting in an effective reduction in the time required for payment of cheques, the associated cost of transit and delays in processing, etc., thus speeding up the process of collection or realization of cheques.

History

The Reserve Bank of India first implemented CTS in National Capital Region,

New Delhi New Delhi (; ) is the Capital city, capital of India and a part of the Delhi, National Capital Territory of Delhi (NCT). New Delhi is the seat of all three branches of the Government of India, hosting the Rashtrapati Bhavan, New Parliament ...

from 1 February 2008 with ten pilot banks and the deadline was set as 30 April 2008 for all the banks. This was followed by launch of CTS in

Chennai Chennai, also known as Madras (List of renamed places in India#Tamil Nadu, its official name until 1996), is the capital city, capital and List of cities in Tamil Nadu by population, largest city of Tamil Nadu, the southernmost states and ...

on 24 September 2011. After migration from MICR to CTS the traditional MICR based cheque processing was discontinued in NCR and

. Based on the experience gained and the benefits that would accrue to the customers and banks, it was decided to bring CTS into operation across the country. Starting 1 August 2013 only CTS-2010 compliant cheques would be accepted for clearing. On 17 July 2013 the RBI extended the deadline to 31 December 2013.

Expected benefits

For banks

Banks derive multiple benefits through the implementation of CTS, like a faster clearing cycle meaning technically possible realization of proceeds of a cheque within the same day. It offers better reconciliation/ verification, better customer service and enhanced customer window. Operational efficiency provides a direct boost to bottom lines of banks as clearing of local cheques is a high cost low revenue activity. Besides, it reduces operational risk by securing the transmission route. Centralized image archival systems ensure that data storage and retrieval is easy. Reduction of manual tasks leads to reduction of errors. Real-time tracking and visibility of the cheques, less frauds with secured transfer of images to the RBI are other benefits that banks derive from this solution.Cheque Truncation System (CTS) in India- An Introduction & FAQs, banknetindia.com

For customers

Customer satisfaction Customer satisfaction is a term frequently used in marketing to evaluate customer experience. It is a measure of how products and services supplied by a company meet or surpass customer expectation. Customer satisfaction is defined as "the number ...

is enhanced, due to the reduced turn around time (TAT). It also offers better reconciliation and fraud prevention.

References

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