The Cheque Truncation System (CTS) is basically 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 Charecter 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 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 presenting bank and the paying bank are safeguarded by the Public Key Infrastructure (PKI) of the Clearing House.
The Cheque Truncation System (CTS) is beneficial to banks as well as to their customers. In this process, time taken for payment of cheque, cost of transit is considerably reduced, as the instrument need not reach the drawee branch except in exceptional circumstances. The risk of loss of 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 easy the complexities in interbank clearing reconciliation associated with exchange of physical cheques.
What is CTS 2010 standard?
With the migration to CTS clearing system, the old format of cheque leaf in banks is substituted by the new look “CTS-2010 standard” cheque leaf. The Standardisation of cheque leaf taken place in terms of size, MICR band, quality of paper, etc. which were the important factors that enabled mechanization of cheque processing. In CTS-2010 standard cheque forms, mandatory features are prescribed with the set of benchmarks as specified by RBI. One of the mandatory features of the CTS prescribed by RBI is that no changes/corrections should be carried out on the cheques (other than for date validation purposes, if required). For any change in the payee’s name, courtesy amount (amount in figures) or legal amount (amount in words), etc., fresh cheque forms should be used by customers. This would help banks to identify and control fraudulent alterations.
What is a positive payment cheque under CTS?
The concept of Positive Pay involves a mechanism of reconfirming key details of large value cheques. Under this mechanism, the account holder shall furnish certain details of cheque through electronic channels like SMS, mobile app, internet banking, ATM, etc., to the drawee bank. RBI has issued a circular stating that the Positive Pay System shall be implemented from January 01, 2021, for all cheques of value Rs.50000 (Rupees fifty thousand) and above.