The Cheque Truncation System (CTS), initiated by the Reserve Bank of India in 2010, enhances the efficiency of cheque clearing by eliminating physical cheque transfers, reducing the process time from 3-4 days to about 1 day. The system uses digital capture and electronic processing, benefiting customers with faster credits and reducing risks for banks by minimizing errors and costs. Legal considerations include compliance with the Negotiable Instrument Act and ensuring the authenticity of cheques and signatures.

1. CHEQUE
TRUNCATION
SYSTEM (CTS)
NAME SANGITA CHINA
DMT CONSULTING (P) LIMITED
DATE 01-05-2021

2. CHEQUE TRUNCATION
SYSTEM :
Cheque Truncation System (CTS), in India, is a project of the Reserve Bank of
India (RBI), commenced in 2010, for faster clearing of cheques.

3. INFRASTRUCTURE
REQUIRED- POINT OF
TRUNCATION
1. Image
2. Cheque scanner
3. Hardware
4. Software
5. Network

4. WORKING OF CTS:
•In the earlier system, customer 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 takes 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.

5. PROCESS OF CTS:
1. The cheque is captured by the presenting bank (collecting
bank) through a ‘Capture System’
2. An encrypted format to the ‘Clearing House’, from where it
will be sent to the paying bank
3. A clearing House Interface, which is sort of a gateway.
4. Presentation Clearing’, which involves the process of data
reading.
5. The payment is processed

6. CHEQUE TRUNCATION
SYSTEM FORMAT

7. BENEFITS OF CTS:
1. Benefits to customer:
I. No fear of loss of cheque in transit
II. Faster credit of funds to customer’s account
III. More secure
IV. Lesser chances of fraud
V. Multi-city cheques could be cleared on the same day

8. BENEFITS OF CTS:
2. Benefits to Banks:
I. Reduction in cost of transit and errors to manual work
II. Verification will also be faster
III. Shorter clearing cycle
IV. Operational efficiency
V. Reduction risks involving paper sharing

9. LEGAL ISSUES INVOLVED
•The Negotiable Instrument Act, Information Technology Act
•Verification
•KYC norms
•Verification of the signature and availability of funds
•Genuineness of the cheque.
•The physical instrument for verification

10. CONCLUSIONS:
CTS is a move in the right direction and will ensure the efficiency,
transparency, security and faster credit of funds benefiting both customer as
well as bank. • Obstacles due to jurisdiction and geographical restrictions will
reduce and customer can get quick access to his funds.