Shortly, in a few hours you will know the fate of the clearing cheque presented under CTS

RBI in its Statement on Developmental and Regulatory Policies on Thursday (August 8, 2024) announced the implementation of Continuous Clearing of Cheques under the Cheque Truncation System (CTS).

 The Cheque Truncation System (CTS) is an online Image-based Clearing System (ICS).  In this system of clearing, the collecting bank need not present the physical cheque to the drawee branch. The presenting bank captures the cheque images and Magnetic Ink Character Recognition (MICR) data from end-to-end precise scanners by using the Capture System. The electronic images of the cheques are then sent to the drawee branch through a clearing house with the relevant information like the MICR fields, date of presentation, presenting bank, etc. The security, integrity, non-repudiation, and authenticity of the data and image transmitted between the presenting bank and the paying bank are safeguarded by the Public Key Infrastructure (PKI) of the Clearing House.

The Cheque Truncation System (CTS) currently processes cheques with a clearing cycle of up to two working days. To improve the efficiency of cheque clearing and reduce settlement risk for participants, and enhance customer experience, it is proposed to transition CTS from the current approach of batch processing to a continuous clearing with ‘on-realization-settlement’. Cheques will be scanned, presented, and passed in a few hours and continuously during business hours. The clearing cycle will reduce from the present T+1 days to a few hours. RBI said that the detailed guidelines in this regard shall be issued shortly.

The Cheque Truncation System (CTS) is beneficial to banks as well as to their customers. In this process, the time taken for payment of cheque, and the cost of transit is considerably reduced, as the instrument need not reach the drawee branch except in exceptional circumstances. The risk of loss of an instrument in transit is also eliminated as the physical movement of instruments does not take place. Further,   it removes the geographical limitations of the earlier clearing system as the bank branches falling within the grid jurisdiction are treated as local clearing. Thus the outstation cheques within the grid are cleared as local cheques which effectively eliminate outstation cheque collection charges as well as saves time. It has also eased the complexities in interbank clearing reconciliation associated with the exchange of physical cheques.