1. Summary
  2. Cheque Truncation System (CTS)
  3. Grid-based CTS clearing
  4. CTS Clearing Cycle
  5. Benefits of Cheque Truncation System


As per instrument Act, 1881, every and cheque is needed to be given to the payer bank (paying bank) for the payment. Earlier, cheques were deposited by customers, accustomed to being given by the aggregation bank (customer’s bank) to the paying bank (cheque issuer’s bank). Thus, it needed the physical movement of the cheque from the aggregation bank to the paying bank, intense a big quantity of your time to clear the cheque. (Consider many cheques to be cleared in many paying banks! what quantity time it might take!). Then, came the idea of financial institutions. Banks set to fulfill during this financial institution that acted because of the central place and settle their web amounts of cheques. So it reduced cheque interval as a result of they have not visited many paying banks, taking many cheques.

Cheque Truncation System (CTS)

At present, we tend to get a brand new idea of cheque clearing. Rather than causation the cheque physically by the aggregation bank to the paying bank, An ikon (scan copy, at the side of all necessary details) is transmitted to the drawee/paying bank for payment through the financial institution. This reduced the time drastically, as CTS stopped the physical movement of cheques from one bank to a different, and additionally, the prices involved it. The banking concern of Bharat (RBI) recently created it obligatory for all banks to implement Cheque Truncation System (CTS) all told their branches across the country by Sep thirty, 2021. The Cheque Truncation System (CTS) has been in use since 2010 and presently extends to around 1,50,000 branches

Grid-based CTS clearing

RBI enforced CTS within the capital Region (NCR) of the latest city, urban center, and Bombay with impact from Gregorian calendar month one, 2008, Sep twenty-four, 2011 and Gregorian calendar month twenty-seven, 2013 severally. The standard MICR-based cheque is processed after migrating cheque volume from the MICR system to CTS, in following three locations. Based on the benefits complete and knowledge gained, run batted in set to operationalize CTS across the country. Consequently, Grid-based CTS clearing has been launched in these three locations. 

  • New Delhi Grid – NCR of latest Delhi, Haryana, Punjab, UP, Uttarakhand, Bihar, Jharkhand, Chandigarh
  • Bombay Grid – geographic region, Goa, Gujarat, MP, Chattisgarh
  • urban center Grid – Andhra Pradesh, Telengana, Karnataka, Kerala, Tamil Nadu, Odisha, state, Assam, Puducherry

CTS Clearing Cycle

  • Step one – The aggregation bank (or branch) captures the information (on MICR band), and also the pictures of cheque victimization their Capture System (comprising scanner, core
  • Step two – The aggregation Bank sends the information and captured pictures punctually signed and encrypted to the central process location (Clearing House). The financial institution processes the information, and arrives at the settlement figure, and transfers the pictures and requisite information to the Paying Bank. This can be called presentation clearing.
  • Step three – The Paying Bank receives the pictures and information from the financial institution for the payment process. The paying bank generates the comeback file for unpaid instruments. The comeback file/data is then sent to the financial institution.
  • Step four – The comeback file/data is processed by the financial institution within the comeback clearing session and within the same manner as the presentation clearing session. Then there are provided to the aggregation bank.
  • Step five – The aggregation bank processes the information received from a financial institution. The complete method is understood as Clearing Cycle.

Benefits of Cheque Truncation System

  • Time, cash, and personnel exhausted on physical transfer of cheques from banks to financial institution area unit eliminated
    • Clearing connected frauds lessen plausibly
    • Probability of cheques misplaced in transit is eliminated
    • CTS is additional advanced and safer.
    • It provides faster clearance of cheques
    • Operational risk paper clearance is reduced
    • There are not any further charges levied for the gathering of cheques drawn on a bank placed at intervals the grid, and providing no geographical restrictions

Implementation of CTS

  • It Eliminates the time, cash and personnel wasted throughout the physical movement of cheques (from banks to clearing house).
    • Thus, Cheque Truncation =faster clearing = higher service to customers,
    • CTS helps to control clearing-related frauds
    • There isn’t any concern about losing the cheque in transit.
    • In the year 2010, run batted in came up with the rules for the Cheque Truncation System. (CTS 2010)
    • The banks would wish to upgrade a couple of things to accommodate CTS 2010 standards of run batted in.
    • For example, in their branch offices, they might purchase scanners and install a special software package provided by run batted in, to firmly transfer and receive the scanned image and information.
    • They may have to vary the color scheme of chequebooks so signature and handwriting are visible within the scanned image. 

Hence recently run batted in issued a warning to any or all banks: upgrade your banking infrastructure per CTS 2010 tips, before the tip of Sept. 2012

About the Author

BankReed Admin

Banking Professional with 16 Years of Experience. The idea to start this Blogging Site is to Create Awareness about the Banking and Financial Services.

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