- Cheque truncation system
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Cheque Truncation System (CTS) or Image-based Clearing System (ICS), in India, is a project undertaken by the Reserve Bank of India – RBI, for faster clearing of cheques.[1] 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.
Truncation means, stopping the flow of the physical cheques issued by a drawer to the drawee branch. The physical instrument is truncated at some point en-route to the drawee branch and an electronic image of the cheque is sent to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting banks etc.
Cheque truncation, would eliminate the need to move the physical instruments across branches, except in exceptional circumstances. This would result in effective reduction in the time required for payment of cheques, the associated cost of transit and delays in processing, etc., thus speeding up the process of collection or realization of cheques.
Contents
Adoption Challenges
Integration with existing large banking systems- Legacy systems are a major IT and operational investment for banks. Most Banks have already invested on legacy systems and therefore it becomes vital that the new system has the capability to integrate seamlessly with the existing systems.
Security- Safety and security of financial transactions is of prime importance for Banks as well as consumers. Hence, financial information transmitted over an electronic medium should be proven to be secure against financial frauds.
Resisting to change- Change is always met with resistance. The banks and central regulatory authority need to work to remove apprehensions and reservations about adoption of new technology.
Customer acceptance- Customer acceptance cannot be emphasized enough especially when it comes to financial transactions. This calls for tremendous change in mindset among customers, and they need to be educated and reassured that the new technology is in their favor and to provide them with safer, faster clearance and more secure services.
Expected Benefits
For Banks: Banks can expect multiple benefits through the implementation of CTS, like faster clearing cycle means realization of proceeds of cheque possible within the same day. It offers better reconciliation/verification process, better customer service and enhanced customer window. Operational efficiency will provide a direct boost to bottom lines of banks as clearing of local checks is a high cost low revenue activity. Besides, it reduces operational risk by securing the transmission route. Centralized image archival system ensures data storage and retrieval is easy. Reduction of manual tasks leads to reduction of errors. Customer satisfaction will be enhanced, due to the reduced turn around time (TAT). Real-time tracking and visibility of the cheques, less fraudulent cases with secured transfer of images to the RBI are other possible benefits that banks may derive from this solution.[2]
For Customers: CTS / ICS substantially reduces the time taken to clear the cheques as well enables banks to offer better customer services and increases operational efficiency by cutting down on overheads involved in the physical cheque clearing process. In addition, it also offers better reconciliation and fraud prevention. CTS / ICS uses cheque image, instead of the physical cheque itself, for cheque clearance thus reducing the turn around time drastically.
See also
References
External links
- A pan-India cheque truncation system five years away press release, dnaindia.com
- RBI says new norms applicable to cheque truncation system only press release, moneylife.in
- RBI regulation on cheque truncation system starts news release, oneindia.in
Categories:- Reserve Bank of India
- Payment systems
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