CHEQUE TRUNCATION SYSTEM

Cheque Truncation System is the process of stopping the flow of the physical cheque issued by a drawer to the drawee branch. The physical instrument will be truncated at some point en-route to the drawee branch and an electronic image of the cheque would be sent to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting banks etc. Thus with the implementation of cheque truncation, the need to move the physical instruments across branches would not be required, except in exceptional circumstances. This would effectively reduce the time required for payment of cheques, the associated cost of transit and delay in processing, etc., thus speeding up the process of collection or realization of the cheques.

The images captured at the presenting bank level would be transmitted to the Clearing House and then to the drawee branches with digital signatures of the presenting bank. Thus each image would carry the digital signature. In order to ensure only images of requisite quality reach the drawee branches, there will be a quality check process at the level of the Capture Systems and the Clearing House Interface. In addition, drawers could consider using holograms, bar coding or such other features, which would add to the uniqueness of the images.

RBI is proposing to implement the project on a PILOT basis in the National Capital Region (NCR), New Delhi. Based on the experienced gathered, it would consider extending the coverage to other centres.

The criteria for banks participating in the Cheque truncation system are:

i. Membership of the clearing house in the NCR.

ii. Membership of the Indian Financial Network (INFINET) 

 In respect of banks who are not members of the INFINET, the following alternatives are available

(a) They may become the sub-members of the direct members or

(b) Such banks may use the infrastructure of the other banks having INFINET membership

All the local cheques can be presented in the CTS.

Thus the benefits could be summarized as:

a) Faster clearing cycle

b) Better reconciliation/verification process

c) Better Customer Service ñ Enhanced Customer Window

d)  No Geographical Dependence

e) Operational Efficiency

f) Minimises Transaction Costs.

g) Reduces operational risk by securing the transmission route.

source:bankersadda