On Thursday, RBI in its sixth bi-monthly monetary policy statement said that it will start Cheque Truncation System (CTS) across the country by September 2020. The cheque clearing process would soon be faster than before.
In CTS, instead of using the physical copies of the cheques, banks use scanned copies for settlement. With it, the process of clearing of cheques become partially electronic. The CTS makes the clearing cycle shorter. The verification and reconciliation process is also better than the physical settlement of cheques. Many times, banks lose the cheques in the physical system, but with CTS it won’t happen again. RBI started implementing the CTS as entirely phasing out the cheque system is not possible despite digital transactions picking up.
As per the bankers, maximum cheque clearings are under the CTS.
“A few banks have even stopped taking non-CTS cheques anymore. For all practical purpose, the cheque clearing between scheduled commercial banks now happens within three working days,” said an official of Indian Bank on anonymity as he is not authorized to talk to media.
In the CTS, the image of the cheque is taken at the bank which is then transferred first to the clearing house and then to the drawee branches. Each image has a digital signature from the presenting bank, and there are multiple checks for authenticity of the image captured.
According to the RBI, the system will make the collection of cheques speedier and therefore enhances customer service, reduces the scope for clearing related frauds, minimizes the cost of collection of cheques, reduces reconciliation problems, eliminates logistics problems, and so on.