The Banaskantha District
Central Co-operative Bank Ltd.

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Cheque Truncation System

Cheque truncation is a system for cheque clearing and settlement between banks that are based on electronic data/ images or both, without physical exchange of the instrument. Customers would deposit their cheques with their banks for collection. The collecting banks would scan the images of the cheques. The physical instruments would remain with the collecting bank branches or the centralized clearing department.

Need for CTS

In India, the RBI has implemented inter-bank and customer payments online in the form of RTGS and NEFT. However, cheques remain a prominent mode of payment in the country. Physical cheques account for 75% to 80% of all transactions. Therefore, the RBI has decided to focus on improving the efficiency of the cheque clearing cycle. Therefore, offering Cheque Truncation System (CTS) is an alternative. CTS also decreases operational risks in banking operations as clearing is a highly fraud-prone operation. This explains CTS from the regulators’ perspective.

Benefits of CTS

The benefits of Cheque Truncation System are as follows.

1) Customer Service

An extended cut off time for acceptance of Customer Cheques by banks.

Information can be easily retrieved.

Clearing timelines will be reduced.

2) Operational Benefit

Elimination of reconciliation difference – MICR and Image data travel together.

There are no possibilities of cheques being lost/ tampered/ pilfered.

There are no risks of any manipulation of data and image during transit.