CHEQUE TRUNCATION SYSTEM

Current Context: The Reserve Bank of India (RBI) has announced that the Cheque Truncation System (CTS) will shift from batch processing to continuous clearing with settlement on realisation in two phases. This will significantly speed up cheque clearance from the current 2-day cycle to just a few hours.

ABOUT CHEQUE TRUNCATION SYSTEM (CTS)

• Meaning: A system where physical movement of cheques is stopped, and instead cheque images and MICR data are transferred electronically for clearance.
• Introduced By: Reserve Bank of India (RBI)
• Security Features:
  • PKI-based security architecture
  • Dual access control, user IDs, passwords
  • Smart card and crypto box authentication
• Standards: Only CTS-2010 compliant cheques are accepted. These include features like:
  • High-quality paper with watermark
  • Bank logo in invisible ink
  • Void pantograph
  • Standardised field placement on cheques
• Benefits:
  • Same-day cheque clearance
  • Cost reduction due to no physical movement of cheques
  • Reduced fraud risks
  • Easy data storage and retrieval
  • Centralised image archival system