Cheque truncation system

1. CHEQUE TRUNCATION SYSTEM
Presented by:
Nitya Garg
IBS Business School-Gurgaon

2. ALL ABOUT CTS
• Cheque Truncation System (CTS) was pioneered by the
Reserve Bank of India – RBI, for faster clearing of cheques.
• Cheque Truncation is a system of cheque clearing and
settlement between banks based on electronic data/images or
both without any physical exchange of instruments.
• CTS is designed to enable banks to handle more cheques
electronically , which should make cheque processing faster
and more efficient.

3. Infrastructure Required- Point of
Truncation
• Image standard
• Cheque scanner
• Hardware
• Software
• Interface
• Network

4. Working Group on Cheque Truncation
and E-Cheques
Physical cheque will be truncated with in the Presenting Bank
Point of truncation will be decided by each individual member Bank
Settlement will be generated on the basis of current MICR code line data.
Grey scale Technology will be deployed for imaging.
Images will be preserved for 8 years
A Centralized agency per clearing location will act as an image warehouse
for the Banks.
Public key infrastructure will be deployed to protect image and data flow
over the Network.

5. WORKING OF CTS
• In the earlier system you presented the cheque to the bank which
sent the cheque to the clearing house, after which money would be
credited to your account.
• It usually take 3-4 days for the physical transfer of cheques and
amount to transfer.
• CTS clears cheques electronically.
• Physical transfer of cheques between banks has ended.
• Now it on average takes 1 day to clear and transfer the amount.

6. CHEQUE TRUNCATION SYSTEM FORMAT

7. Benefits of CTS

8. Business Opportunities - Banks
• Improved handling of post-dated cheques deposited by the
customer, as the images can be scanned and stored and the
system can automatically process the scanned images on the
due date.
• Improved business intelligence systems can be put in place.
• Introduction of new payment system products like e-cheques
• Better funds management
• Reduction in Transaction cost
• Better management of space and manpower
• Improved regulatory compliance.
• Improved Management Information Systems which will
facilitate better decision making.

9. Business Opportunities -Vendors
• Upgrade of Technology opens up new business opportunities
for vendors and solution providers
• Can improve the Brand image of their products by providing
improved functionalities for image capture, storage and
retrieval.
• Scope for improvement in processing capabilities , especially
scanners and servers.

10. LEGAL ISSUES INVOLVED
- Amendments made in Negotiable Instrument Act, Information Technology
Act
- Onus of verifying the Genuineness of the Cheque will shift to the stage at
which it is presented
- KYC norms are to be meticulously complied by the Banks, as circulated
by RBI
- Drawee Bank will continue to verify the signature and availability of funds
- Drawee Bank will have the right to seek further information on the
veracity/ genuineness of the cheque.
- Drawee Bank can also seek the physical instrument for verification

11. CONCLUSION
CTS is a move in the right direction and will ensure
• Efficiency
• Transparency
• Security and
• faster credit of funds benefiting both you as well as your
bank.
• Hurdles due to jurisdiction and geographical restrictions will
be obviated and you can have faster access to your funds.
• It’s a win-win situation for banks as well as you.