The Reserve Bank of India has decided to expand the cheque truncation scheme (CTS), which is currently in operation at the country's major clearinghouses, to all bank branches.
The method of stopping the movement of the physical cheque by the presenting bank en-route to the paying bank branch is known as truncation. Instead, an electronic representation of the cheque, along with related information, is sent to the paying branch through the clearinghouse.
"To leverage the availability of CTS and provide uniform customer experience irrespective of the location of a bank branch, it has been decided to extend CTS across all branches in the country," RBI said. To make this possible, banks must ensure that by September 30, 2021, all of their branches are participating in image-based CTS under their respective grids.
Only instruments that are CTS 2010 compliant can be presented for clearing via CTS. The separate non-CTS clearing sessions in CTS grid centres were phased out on December 31, 2018.
CTS has been in use since 2010, and it includes roughly 1.5 lakh divisions. Since September 2020, all of the 1,219 non-CTS clearing houses have been migrated to CTS.
The benefits from CTS could be summarized as follows -
- Clearing time is reduced.
- Method of superior verification and reconciliation
- There are no territorial limitations to the jurisdiction.
- Banks and customers both benefit from operating efficiency.
- Reduced operating risk and related risks associated with paper clearing
- There are no collection fees if the cheque is drawn on a bank inside the grid.