- RBI and CTS
- Purpose of CTS
- Process of Cheque Truncation System (CTS)
- Benefits of CTS
5.1 Benefits to Account Holders
5.2 Benefits to Various Customers of Banks
5.3 Benefits of Grid based CTS to the Banking System
Cheque Truncation System (CTS) may be a method of clearing cheques electronically instead of the process of the physical cheque by presenting bank en-route to the paying bank branch. It’s a step undertaken by the bank Reserve bank of India for faster cheque clearance because truncation is the course of discontinuing the flow of the physical cheque in its method of clearing for term proposes. Thus the cheque is transferred with very important essential knowledge.
RBI and CTS
Reserve Bank of Bharat (RBI) introduced pan-India CTS in September 2020 to create cheque clearing safer and quicker. Recently, it had been created necessary for all banks to implement Cheque Truncation System (CTS) all told their branches across the country by September 30, 2021. CTS is going to be a good move towards Digital Bharat. IMPS, RTGS, and NEFT were the sport changers for the banking sector. Cheques are still one in every one of the distinguished modes of payments in Bharat, and also the speedy cheque clearance cycle via CTS will certainly end in higher client expertise. It’ll additionally build the method a lot of economical, cost-efficient, and safer for the banks.
Purpose of CTS
In India, the tally has created out there inter-bank and client payments online in near-real time within the sort of RTGS and NEFT. However, cheques still stay a distinguished mode of payment within the country. Physical cheques still account for seventy-fifth to eightieth of all transactions.
So, the tally has been determined to specialize in the rising potency of the cheque clearing cycle. Thus, providing CTS is another. CTS additionally reduces operational risks in banking operations as clearing may be an extremely fraud-prone operation. This explains CTS from the regulators’ perspective.
Process of Cheque Truncation System (CTS)
- Collection of Cheques: First off, branches collect cheques from a client so at a regular time, send them to their various service branch.
- Capturing of Data: Service branch captures the info (like MICR code, cheque variety, quantity, etc) and also the pictures of cheque victimization their Capture System (containing scanner, core banking or CTS application) that is internal to them, and meeting the specifications and standards prescribed for knowledge and image. When this entire data of cheque firmly transmitted at Clearing House Interface (CHI) then from CHI to CH wherever actual settlement of clearing occurs.
- Security of Data: To confirm security, safety, and non-repudiation of knowledge/pictures, end-to-end Public Key Infrastructure (PKI) has been enforced in CTS. However, as a part of the need, the aggregation bank (presenting bank) sends the info and captured pictures punctually signed and encrypted to the central process location (Clearing House) for onward transmission to the paying bank (destination or remunerator bank).
- Clearing House Interface: For the aim of participation, the presenting remunerator banks are given an interface/entrance referred to as the CHI that permits them to attach and transmit knowledge and pictures in an exceedingly secure and safe manner to the financial institution (CH).
- Presentation Clearing: The financial institution processes the info, arrives at the settlement figure, and routes the pictures and requisite knowledge to the remunerator banks. This can be referred to as the presentation clearing.
- Processing of Payment: The remunerator banks through their CHIs receive the pictures and knowledge from the financial institution for the payment process. The remunerator Cheque Truncation System additionally generates the come file for unpaid instruments, if any. The come file/knowledge sent by the remunerator banks are processed by the financial institution within the come clearing session within the same method as presentation clearing and come knowledge is provided to the presenting banks for the process.
- Completion of Cycle: The clearing cycle is treated as complete once the presentation clearing and also the clearing sessions are with success processed. The complete essence of CTS technology lies within the use of pictures of cheques (instead of the physical cheques) for the payment process.
Benefits of CTS
Benefits to Account Holders
Account-holders get loads of advantages in terms of:
- No physical movement of cheques, therefore no concern of loss of cheque in transit.
- Quicker clearance, shorter clearing cycle, and speedier credit of the number to your account.
- Cheques obtaining cleared on a similar day or inside twenty-four hours.
Benefits to Customers of Banks
Banks have varied advantages from CTS that can be summarized as under:
- Comparatively Shorter clearing cycle,
- Superior verification and reconciliation method,
- No geographical restrictions on the jurisdiction,
- Operational potency for banks and customers alike,
- Reduction in operational risk and risks related to paper clearing
- Scope for frauds are minimum
Benefits of Grid-based CTS to the banking industry
Various advantages of Grid-based mostly CTS are as follows:
- Cost Savings
- Minimization of investment in MICR Machines and connected AMC prices
- Reduction in liquidity necessities for the banks
- Reduction in Cheque process Fee
- Further, reduction in Operational Overhead
- Elimination of clearing variations and reconciliation problems etc.