Cheque Truncation System Product Overview

CTS

Benefits

Customer Service

  • Extended cut off time for acceptance of Customer Cheques by banks
  • Easy retrieval of information
  • Reduced timelines for clearing

Operational Benefit

  • MICR amount encoding not required
  • Reconciliation difference eliminated - MICR and Image data travel together
  • No cheques being lost/tampered/pilfered
  • No risk of any manipulation of data and image during transit
  • CTS 2010 standards leading to enhanced security and automation

Commercial Benefit

  • Cost involved in paper movement eliminated
  • Grid implementation allowing better liquidity management for banks

Fraud Prevention Mechanism Provided

  • Manipulation of data and image during transit is prevented by digital signature / encryption.
  • CTS 2010 standards lead to enhanced security (Pl refer to attached NPCI circular for CTS 2010 standard)
  • MICR reject repair flag

Decrease in Time Scales

Prior to CTS clearing, instruments used to get settled in MICR clearing. There were total 66 MICR centers across India. These MICR centers used to undertake clearing & settlement in their local geography. The intra MICR clearing was considered outstation clearing. During MICR clearing physical instruments were travelling for clearing to respective MICR center. The typical flow for clearing is explained in next paragraph.

Customer deposits an instrument in drop box/ collection point / Bank-Branch. All instruments received before a cut-off time are collected & physically transported to service branch of the presenting bank. The instruments would get sorted as per MICR clearing centers & would physically travel to corresponding MICR clearing center i.e. Local or outstation clearing. At MICR centers respective bank would present and collect their instruments. These would be taken through the same route to respective bank-branch for processing. The rejected instruments would traverse the same route bank to presenting bank-branch. The return cycle of rejected instruments would be completed next day & settlement is completed on completion of return cycle. The customer would get funds on completion of settlement process.

In CTS scenario, the physical instrument is truncated at presenting bank end (either at branch level or service branch level). The images & data of collected instrument captured at presenting bank would travel electronically to drawee bank for processing same day. The return cycle would be completed next day. The return cycle would be completed next day & settlement is completed on completion of return cycle. The customer would get funds on completion of settlement process. Further all clearing locations are divided in 3 regional grids. All Clearing locations are of a grid are settled together on T+1 basis.

The typical timelines are as follows:

CTS clearing in a Grid MICR Clearing Remarks
Settlement on T+1 Basis i.e. customer can get funds on Next working day, subject to bank policies. Local Bank-Branch
Settlement on T+2 Basis i.e. customer get funds after 2 working days. CTS Benefit of approx. 1 day
Other MICR Location (outstation) - Own Bank-Branch presence
Typically Settlement on T+4 Basis i.e. customer can get funds on 4th working day (including travel and presenting time at outstation location) CTS Benefit of approx. 3 days
Other MICR Location (outstation) - Bank-Branch presence through
Typically Settlement on T+7 Basis i.e. customer can get funds on 7th working day, (including travel and presenting time at outstation location and fund transfer from correspondence bank). CTS Benefit of approx. 6 days
Other MICR Location (outstation) - Bank-Branch No tie-up
Typically Settlement on T+10 Basis i.e. customer can get funds on 7th working day, (including travel and presenting time at outstation location and DD travel & encashment at originating location). CTS Benefit of approx. 9 days,
CTS