Cheque Truncation System (CTS) allows for the electronic clearing of cheques by capturing images instead of physically transferring cheques. This speeds up the clearing process from 3-4 days to on average 1 day. Under CTS, when a cheque is deposited, the presenting bank truncates or removes the physical cheque and captures an image. The image is sent electronically to the clearing house which forwards it to the paying bank. This eliminates the need for physical movement of cheques between banks. CTS provides benefits like faster clearing, reduced costs, and improved customer service for banks and their customers.

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.