What is Cheque Truncation System?

Reserve Bank of India has introduced CTS will will be applicable from April 1, 2013. It was earlier scheduled to start on January 1, 2013 but somehow it could not take off.

Cheque Truncation System (CTS) or Image-based Clearing System (ICS), in India  is a project undertaken by the Reserve Bank of India (RBI), for faster clearing of cheques.

See Video below for Complete overview of CTS

It is basically an online image-based cheque clearing system where cheque images and Magnetic Ink Character Recognition (MICR) data are captured at the collecting bank branch and transmitted electronically.

Truncation means, stopping the flow of the physical cheques issued by a drawer to the drawee branch. The physical instrument is truncated at some point and route to the drawee branch and an electronic image of the cheque is sent to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting banks etc.

BENEFITS OF THIS SYSTEM:

Cheque truncation would eliminate the need to move the physical instruments across branches, except in exceptional circumstances. This would result in effective reduction in the time required for payment of cheques, the associated cost of transit and delays in processing, etc.