The CTS 2010 is different from the earlier cheque clearance system without any physical movement of cheques between banks. An electronic image of the cheque gets transmitted to the drawee branch or bank due to the cheque truncation system. Significant relevant information gets shared along with the image, such as presenting bank details, MICR band data and presentation date. RBI made the CTS cheque effective from 2013, conforming to the CTS 2010 standards with uniform features
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Did you know?
- The CTS was introduced on February 1, 2008, with ten pilot banks in New Delhi and the NCR region.
- April 30, 2008, became the deadline for all the banks to adopt the CTS system.
- Chennai became the next place to launch the system on September 24, 2011.
- Before the procedure took place, instruments got settled in MICR clearing.
- In about 66 MICR centres, CTS cheques were undertaken for clearing and settlement.
- The intra clearing that took place was considered outstation clearing.
Check Truncation System in India
As per RBI guidelines, banks had been advised to issue cheques to customers and only ‘CTS-2010’ standard cheques.
- CTS implementation in the country took effect on 1 February 2008, 24 September 2011, and 27 April 2013 in New Delhi, Chennai and Mumbai, respectively.
- After transitioning from the MICR system to CTS, the cheque based on MICR stopped functioning in the entire country.
- The new approach, or the grid-based approach with the consolidation of the cheque volume, began to take form in three grids in the three major metropolitan cities.
- Clearing and processing services were provided from each grid to banks under its respective jurisdiction.
- A branch of a particular bank and its customers in remote locations under the jurisdiction of a grid got benefitted, irrespective of an existence of an arrangement for CTS cheque clearing or not.
Also Read: Guide to Writing a Cheque in The Right Way
Jurisdiction of Three Grids
- The Grid in New Delhi: New Delhi and NCR, Uttarakhand, Jharkhand, Union Territory of Chandigarh, Bihar, Punjab, Uttar Pradesh, Haryana and Rajasthan.
- The Grid in Mumbai: Maharashtra, Gujarat, Chattisgarh, Goa, and Madhya Pradesh.
- The Grid in Chennai: Tamil Nadu, Union Territory of Puducherry, Assam, Karnataka, West Bengal, Telangana, Odisha, Kerala and Andhra Pradesh.
What Exactly is Cheque Truncation?
The truncation process involves the discontinuation of the flow of the physical cheque from the presenting bank to the paying bank. CTS is short for a cheque truncation system, allowing for faster and more secured clearances. Transmission of an electronic cheque image takes place until the paying branch. Customers bear the elimination of associated costs as the movement of physical cheques is stopped. Time is saved required for the cheque collection, and the activity of cheque processing reaches another level. In this image-based cheque clearing system, images of cheques are scanned, and electronic movement or replication of their images takes place for processing and clearing.
Advantages to Customers
The following are the advantages of CTS to customers:
- Shortened Cycle of Clearance: After implementing the CTS system all over the country, the cheque movements that took place manually ceased. The settlement process has become faster due to the electronic transmission of cheques enabling a reduction in the cycle of clearance.
- No Loss of Cheques: Customers will no longer keep the fear of loss of cheques during a transfer from the collecting bank to the payee bank.
- Without any Geographical Restrictions: The CTS cheque clearing process and its limitations concerning geographical restrictions and jurisdiction are no more.
- Depletion of Fraud: The scope of fraud is curtailed due to the introduction of CTS. The quickness of the electronic transmission allows customers to detect fraud directed towards the payee, amount or the issuer of the cheque. The security features of CTS-2010 standards come along with a robust verification process.
- Amplifies Operational Efficiency: The customer is provided with an operational efficiency lifted and intensified after the emergence of CTS.
Advantages to Banks
The following are the advantages of CTS to banks:
- Uplifted Customer Window: Customer service is appreciable and better with the amalgamation of CTS in banks. Better reconciliation or verification process is offered with an uplifted customer window.
- Boosts Banks: Banks' bottom lines get a boost as a result of operational efficiency as the local cheques clearances are a high-cost, low revenue activity.
- Secures Route of Transmission: The transmission route is safe and secured, making a bank serve its customers better. The operational risk that is involved in the activities of banks is reduced.
- Easy Retrieval: Data storage is established due to a centralised image archival system, and retrieval is quite easy for the transfer of a CTS cheque.
- Fewer Errors: As the system is introduced in banks, manual tasks have taken a back seat, and errors get reduced.
- Diminishes TAT: Customer satisfaction is associated with a financial organisation such as a bank instead of the diminishing turnaround time.
- Secure Transfer of Images: The grid-based system guarantees fewer fraudulent cases, secured transfer of images to the Reserve Bank of India and real-time tracking and visibility of the cheques.
CTS Process
- A bank branch initially collects cheques from customers, and at a scheduled time, it is sent to their respective service branch.
- With the help of a containing scanner, core banking or CTS application, data and the images of a cheque are captured in a service branch.
- For non-repudiation and security of data or images, end-to-end Public Key Infrastructure implementation is visible in CTS. The captured images and data from the collecting bank are sent after signed and encrypted to a central processing location for further transmission to the paying bank.
- CHI or Clearing House Interface has to connect with a Clearing House for secured transmission of images and data in presenting and drawee banks for participation purposes.
- In the next part of the process, known as presentation clearing, data is processed, arrives at the settlement figure and routes the CTS cheque images, and information is requisite to the drawee banks.
- The drawee bank, now, has to function for payment processing. The drawee CTS for unpaid instruments generates the return file if there is any. The return file is processed by CH similarly to presentation clearing, and return data is provided to presenting banks.
- After the presentation clearing and the associated return clearing sessions are complete, the completion of the cycle takes place. The images of cheques have got to do with the payment processing during the entire process of CTS technology.
Also Read: Account Payee Cheques: What Do They Mean?
Features of the Cheque
- Paper: Whenever ultraviolet rays fall on the cheques, which is a standard paper, it doesn’t glow, and it is safe from bleaches, acids and alkalis. A visible reaction is notable when a fraudulent attempt is made. It is really difficult to bring any sort of alteration to the standard paper. Uniformity is in the quality of the cheque paper for all banks.
- Watermark: CTS-India is visible from a good light source or torch flash in the oval-shaped watermark. Authorised personnel get the paper of the cheque for handling and cheque printing. A xerox copy or printing the same with any printer will not happen as a CTS cheque has one watermark of CTS-India in it.
- Pantograph: In a cheque, there is a hidden pantograph of the word – copy or void. An individual can notice the downside of the cheque in the left corner and under the account number. A xerox copy or a scan in colour will make the pantograph visible, and the pantograph cannot be seen in a scanned copy at the mentioned resolution in CTS.
- Logo: The cheque also includes the logo of the bank in it. Only through ultraviolet rays can a logo in a cheque be visible to an individual.
- Colour: A light-coloured or pastel clutter-free background is integral to the cheque. The best quality is ensured with a fine content of the image.
Conclusion
An individual receives a speedy transfer of fund credit to his account, which is possible due to the CTS cheque.
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