What Is A Cheque Truncation System?
What Is A Cheque Truncation System?
What Is A Cheque Truncation System?
The Payee would deposit the cheque is his/her bank. If the payee or beneficiary of
cheque has an account in the same bank in the same city the funds are credited into
his account through internal arrangement of the bank
If the beneficiary has an account with any other bank in the same or in any other city,
then his banker would ensure that funds are collected from the payers banker through
a clearing house. A clearing house is an association of banks that facilitates payments
through cheques between different bank branches within a city / place. There are more
than 1000 clearing houses operating all over the country facilitating cheque payments.
These are managed by the RBI, State Bank of India and other public sector banks. To
identify the paying bank, the clearing house looks at checks routing number,
MICR, the nine-digit number at the bottom of your cheque, to the right of your
account number. It identifies postal code/city and state of the origin of the cheque.
MICR of cheque
The clearing house presents paying bank with the cheque along with a payment
request to drawees bank, which checks if there are sufficient funds in the account of
drawer to pay money.
If the drawers bank decides to pay then the clearing bank proceeds to settle the
check, debiting drawers bank and crediting the payees bank for the value of the
check.The paying bank debits the amount from the drawers account.
Local Cheques - These are cheques whereby the cheque issuer bank branch and the
receiver bank branch are in the same city
Outstation Cheques - These are cheques whereby the cheque issuer bank branch and
the receiver bank branch are in different cities
Local Cheques - All Local Cheques must be cleared on a T+1 basis. i.e., If I Deposit a local
cheque into my bank account today (irrespective of which bank the cheque is drawn or
deposited) the funds must reach my account by End-Of-Day Tomorrow. Of course, this is
only if the deposit happened before the cut-off time for today. For ex: Lets say ICICI Bank
has a cut of time of 1:00 PM. So, all cheques deposited after 1:00 PM the previous day and
those deposited before 1:00 PM today are processed in one batch and sent for payment. If you
deposit your cheque after 1:00 PM, it will be processed only tomorrow and funds will be
available one day after that. Outstation Cheques Processing of Outstation Cheques
depends on location of drawees bank.
In CTS, the presenting bank (or its branch) captures the data (on the MICR band) and
the images of a cheque using their Capture System (comprising of a scanner, core
banking or other application
The collecting bank (presenting bank) sends the data and captured images duly signed
and encrypted to the central processing location (Clearing House) for onward
transmission to the paying bank (destination or drawee bank). For the purpose of
participation the presenting and drawee banks are provided with an interface /
gateway called the Clearing House Interface (CHI) that enables them to connect and
transmit data and images in a secure and safe manner to the Clearing House (CH).
The Clearing House processes the data, arrives at the settlement figure and routes the
images and requisite data to the drawee banks. This is called the presentation clearing.
The drawee banks through their CHIs receive the images and data from the Clearing
House for payment processing. The drawee CHIs also generate the return file for
unpaid instruments.
Avoid any alterations or corrections thereon. For any change in the payees name,
amount in figures or in words, fresh cheque leaves should be used by customers, as
this will facilitate smooth passage through image based clearing system.
As images of cheques (and not the physical cheques) alone need to move in CTS:
This would result in effective reduction in the time required for payment of cheques,
the associated cost of transit and delays in processing, etc.
Cheque truncation eliminates the need to move the physical instruments across branches,
except in exceptional circumstances, thus speeding up the process of collection or realization
of cheques. The Reserve Bank had implemented CTS in the National Capital Region (NCR),
New Delhi and Chennai with effect from February 1, 2008 and September 24, 2011. After
migration of the entire cheque volume from MICR system to CTS, , the traditional MICRbased cheque processing has been discontinued in these two locations. Based on the
advantages realised by the stakeholders and the experienced gained from the roll-out in these
centres, it was decided to operationalise CTS across the country by Jan 1 2013. For more
details read RBIs FAQ on Cheque Truncation System
Cheques for CTS 2010
All types of cheques can be presented for clearing through CTS. But to achieve
standardisation of cheques issued by banks across the country and to reduce cheque frauds set
of benchmarks called as CTS-2010 standard are introduced.These include provision of
mandatory minimum security features on cheque forms like quality of paper, watermark,
banks logo in invisible ink, void pantograph, etc., and standardisation of field placements on
cheques. As shown in picture below (Ref: Economic Times Check your cheque status)
4. A pantograph which shows VOID/COPY while taking photocopy of the cheque below
the account number
5. New rupee symbol instead of bilingual format
6. Please sign above is mentioned on bottom right of the cheque
7. Watermark CTS INDIA to be visible cheque is held against any light.
8. Ultra Violet logo of Bank printed at upper left corner of cheque to be visible in UV
lamps
If you have issued post-dated cheques (PDCs)(say for your home or auto loan EMIs),
you will have to issue fresh cheques.
If you have opted for the ECS (electronic clearing system) mode the new system will
not impact you.
For issuing cheque after Mar 31 2013 you need cheques which are CTS-2010
compliant.
Banks have stopped accepting non CTC 2010 cheques after Dec 31, 2013. Related
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