RBI: Image-based Cheque Truncation System in all branches

Updated On : October 2021

A Cheque Truncation System (CTS) is a procedure that simplifies the electronic processing of a cheque with the use of the scanned image of the instrument, Magnetic Ink Character Reader (MICR) data and without involving any physical exchange or movement of the financial instrument. The branches of the banks that don’t have any formal clearing arrangement, their customers face difficulties because of the time taken and the cost involved in the collection of checks submitted by them. Hence CTS was introduced by RBI.

The Check Truncation System (CTS) came into use in the year 2010 and currently covers 1,50,000 branches. 1,219 non-CTS clearing houses (ECCS centres) were migrated to CTS effective from September 2020.

Presently, there are almost 18,000 bank branches that don’t have any formal clearing arrangement at all.

With an objective to achieve operational efficiency in paper-based clearing and making the process of collection along with settlement of cheques faster and leverage the availability of CTS and provide a uniform customer experience irrespective of the location of the bank branch, the Reserve Bank of India (RBI) has decided to bring all such branches under the CTS mechanism.

This move by RBI is aimed at faster settlement of checks resulting in better customer service.

What is the new approach introduced by RBI for CTS implementation in the country:

It is a grid-based nationwide approach roll-out. With this approach, the entire check volume in the country which used to initially clear through 66 MICR check processing locations now it is consolidated into the three grids in New Delhi, Mumbai and Chennai. The banks, it’s branches and the customers belonging to small or remote locations who fall under the jurisdiction of the grid will be benefited.

Advantages of implementing CTS:

• Ease of clearing of checks
• The CTS helps the banks and customers to exchange images of checks instead of moving papers around the country
• Faster clearing cycle
• Improved operational efficiency for banks and customers
• Reduced operational risk and risks associated with paper-based clearing
• No collection charges applied for the collection of checks drawn on a bank located within the grid

FinCraft^TM CTS is a web-based solution having the capabilities of imaging cheques that reduces the time taken for clearing the cheques. The solution prevents fraud and helps in reconciliation with higher operational efficiency.

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