As against CTS or cheque truncation system currently functional in only some of the major clearing houses, the RBI has decided to launch it on a pan-India basis from September 2020. The move will fasten the process of cheque clearing while rendering it safer at the same time. In its Statement on Development and Regulatory Policies, the RBI said, "CTS, which is currently operational at the major clearing houses of the country, has stabilised well and it has made large efficiency gains. In view of this, a pan India CTS will be made operational by September 2020."
What is cheque truncation system or CTS?
Cheque Truncation System (CTS) introduced way back in 2008 aimed at improving the efficiency of cheque clearing cycle and there is no physical exchange of instruments. Instead, the system involves stopping the flow of the physical cheque issued by a drawer bank with the presenting bank en-route to the drawee bank branch.
The intermittent process between clearing and settlement of cheque involves transmission of electronic image of the cheque to the paying branch via the clearing house. Also, other relevant details including data on the MICR band, presenting bank, date of presentation etc. are sent across.
As per the RBI, the process effectively cuts down the cost otherwise involved in physical movement of cheques as well as reduces the time taken in their collection. All types of cheques can be presented for clearing through the CTS.