What is Cheque Truncation System (CTS) or Image Based Clearing System (CS)

Image-based clearing system or Cheque Truncation System may be a project undertaken by the reserve bank of india for quicker clearing of cheques. Cheque truncation system is essentially an internet image based mostly cheque clearing system where cheque pictures and MICR (Magnetic Ink Character Recognition) information ar captured at the aggregation bank branch and transmitted electronically.

Truncation means that stopping the flow of the physical cheques issued by a drawer to the cheque payer branch. The physical instrument is truncated at some purpose en-route to the cheque payer branch and an electronic picture or image of the cheque is distributed to the payer branch at the side of the relevant data just like the MICR fields information of presentation presenting banks etc.

cheque truncation would eliminate the need to move the physical instruments across branches except in exceptional circumstances. this might end in effective reduction within the time required for cheques payment, the associated value of transit and delays in process etc. thus speeding up the process of assortment or realization of cheques.

Expected advantages

Benefit For banks:- Banks will expect multiple advantages through the implementation of Cheque Truncation System like quicker clearing cycle means that realization of take of cheque possible among an equivalent day. It offers higher reconciliation or verification process better client service and enhanced customer window. Operational efficiency will provide an on the spot boost to bottom lines of banks as clearing of native checks may be a high cost low revenue activity. Besides it reduces operational risk by securing the transmission route. Centralized image archival system ensures information storage and retrieval is simple. Reduction of manual tasks results in reduction of errors. client satisfaction are going to be increased as a result of the reduced turn around Time (TAT). Real time following and visibility of the cheques less fallacious cases with secured transfer of pictures to the reserve bank of India ar different possible advantages that banks could derive from this solution. 

Benefit For Customers:- cheque truncation system or Image-based clearing system (ICS) substantially reduces the time taken to clear the cheques in addition allows banks to offer higher client services and will increase operational efficiency by cutting down on overheads concerned within the physical cheque clearing method. additionally it conjointly offers higher reconciliation and fraud hindrance. CTS/ICS uses cheque image rather than the physical cheque itself for cheque clearance so reducing the turn around Time drastically.