Cheque truncation is the process in which the physical movement of cheque within a bank, between banks or between banks and the clearing house is curtailed or eliminated, being replaced in whole or in part, by electronic records of their content (with or without the images) for further processing and transmission.The term ‘‘truncate’’ means to remove an original paper cheque from the cheque collection or return process and send to a recipient, in lieu of such original paper cheque, a substitute cheque or, by agreement, information relating to the original cheque (including data taken from the MICR line of the original cheque or an electronic image of the original cheque), whether with or without subsequent delivery of the original paper cheque. Cheque Truncation compels any party in the chain to truncate any cheque (business or commercial) and convert it to an image at the presenting bank level.

Cheque Truncation System (CTS) was implemented by Reserve Bank of India at New Delhi Bankers Clearing House on a pilot basis. With the discontinuance of MICR Clearing w.e.f. 1-7-2009, CTS has covered all bank branches in New Delhi. NPCI is exploring the possibilities of launching the same functionality at Chennai .”