Cheque truncation is the process of stopping the physical flow of a cheque and replacing it with an electronic image that is transmitted to the paying bank along with details like the MICR band data and presentation date. This truncation eliminates the need to move physical cheques, reducing costs associated with physical movement and shortening clearing times. It provides benefits like faster cheque processing, lower collection costs, reduced instrument loss, and removal of logistics problems.

1. CHEQUE TRUNCATION
SYSTEM
PRESENTATION
BY
PROF. vAZE

2. What is Cheque Truncation?
• TRUNCATION IS THE PROCESS OF STOPPING THE
FLOW OF THE PHYSICAL CHEQUE ISSUED BY A
DRAWER AT SOME POINT BY THE PRESENTING
BANK EN-ROUTE TO THE PAYING BANK BRANCH.
• IN ITS PLACE AN ELECTRONIC IMAGE OF THE
CHEQUE IS TRANSMITTED TO THE PAYING BRANCH
THROUGH THE CLEARING HOUSE, ALONG WITH
RELEVANT INFORMATION LIKE DATA ON THE MICR
BAND, DATE OF PRESENTATION, PRESENTING BANK,
ETC.

3. Cheque Truncation
• CHEQUE TRUNCATION THUS OBVIATES THE NEED
TO MOVE THE PHYSICAL INSTRUMENTS ACROSS
BANK BRANCHES, FOR CLEARING PURPOSES.

4. Cheque Truncation
• This effectively eliminates:
• 1) the associated cost of movement of the physical cheques,
• 2) reduces the time required for their collection and
• 3) brings elegance to the entire activity of cheque processing.

5. Cheque Truncation
• CHEQUE TRUNCATION
• 1) SPEEDS UP THE PROCESS OF COLLECTION OF
CHEQUES RESULTING IN BETTER SERVICE TO
CUSTOMERS,
• 2) REDUCES THE SCOPE OF LOSS OF INSTRUMENTS
IN TRANSIT,
• 3) LOWERS THE COST OF COLLECTION OF CHEQUES,
• 4) REMOVES LOGISTICS-RELATED PROBLEMS, THUS
BENEFITTING THE SYSTEM AS A WHOLE.