The Full form of CTS is Cheque Truncation System. It is a project undertaken by the RBI (Reserve Bank of India) which was launched for faster clearance of cheques. It does not involve the physical movement or transfer of cheques from one bank to another bank. Instead, it is basically an online image based cheque clearing system which uses electronic image of the cheque along with relevant information to clear the cheque.
An electronic image of the cheque along with MICR number is sent from the drawer bank to the drawee bank. The Cheque Truncation System was first launched by RBI in February 2008 in National Capital Region, New Delhi and In September 2011, it was launched in Chennai. In 2013, RBI decided that from 1st August 2013 onwards only CTS-2010 cheques would be accepted by the banks for clearance. Later, in July 2013, this deadline was extended to 31 December 2013.
The benefits of CTS are that it saves time, money and efforts involved in the physical transfer of cheques, which results in better customer service. It improves the operational efficiency of banking system and reduces the chances of fraud related to clearing of cheques. In CTS, there is no fear of losing cheques in transit and no geographical restrictions.