Cheque Truncation System (CTS) or Image-based Clearing System (ICS), is a project undertaken by the Reserve Bank of India – RBI, for faster clearing of cheques. Cheque Truncation System (CTS) aims to make cheque clearance more efficient and reduce the clearance time of cheques to one day, thereby trimming down the floating time considerably. CTS is basically an online image-based cheque clearing system where cheque images and Magnetic Ink Character Recognition (MICR) data are captured at the collecting bank branch and transmitted electronically.
In the previous system the cheques were sent from a drawer to the drawee branch. Once CTS comes into force this physical transfer of the cheques will stop.
An online image-based cheque clearing system, the collecting bank branch would deploy scanned images along with the magnetic ink character (MICR) of the cheque which will be sent out electronically using their Capture System, removing the need for physical/manual transfer of cheques. The captured images and the data is then signed and encrypted and sent to the Clearing House or the central processing location and thereafter forwarded to the drawee or paying bank.
Key Features of Cheque Truncation System
1. User friendly graphic user interface
2. Automated coding and endorsing of cheques
3. Encryption of data file before transmission to the clearing house or the service branch
4. Employs a unique transaction follower process to confirm the status of cheque
5. Improved and efficient settlement and prevention of fraud
6. Equipped with enhanced archival procedure that stores images and data facilitating report generation along with future enquiry
7. Alerts RMs in case of return of cheque due to insufficient funds
1. CTS / ICS substantially reduces the time taken to clear the cheques by cutting down on overheads involved in the physical cheque clearing process
2. It offers better reconciliation and fraud prevention.
3. CTS / ICS uses cheque image, instead of the physical cheque itself, for cheque clearance thus reducing the turn around time drastically.
4. It offers better reconciliation/verification process, better customer service and enhanced customer window.
5. Operational efficiency will provide a direct boost to bottom lines of banks as clearing of local cheques is a high cost low revenue activity.
6. Real-time tracking and visibility of the cheques
1. In cases where customers have issues post-dated cheques (PDC) for payment of monthly installments towards an ongoing loan, they would need to issue fresh cheques to the bank or service provider as per the new directive on CTS by the RBI.
2. Customers may need to surrender their old cheque books or cancel them and show proof of cancellation. No replacement fee will be charged by the bank for issuing new cheque books
Starting April 1st, 2013 only CTS-2010 compliant cheques would be accepted for clearing.