The Cheque Truncation System or CTS is the cheque clearance system introduced by RBI to fasten up the clearing of cheques.
- In this system, instead of producing the physical cheques to the payee bank, just the electronic image of the cheque along with the MICR code and other cheque credentials are transmitted to the drawee bank for the payment through a clearing house.
- Under the old paper cheque based clearing, the bank needs to send the paper cheque to the clearing house and get the money and then transfer it to your account.
- This is time consuming. because bank needs to physically move the cheques to a clearing house.
- In Cheque Truncation System (CTS), the bank branch need not send the paper cheque to the clearing house, but merely scan the cheque, and electronically send the image and MICR data to the clearing house.
What are the benefits of Cheque Truncation?
- It Eliminates the time, money and manpower wasted during physical movement of cheques (from banks to clearing house).
- Thus, Cheque Truncation means faster clearing and better service to customers,
- Cheque Truncation system reduces the scope for clearing-related frauds
- There is no fear of losing cheque in transit.
