Cheque truncation system

Cheque truncation system

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  CHEQUE TRUNCATION SYSTEM Presentedby: Nitya Garg IBS Business School-Gurgaon
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  ALL ABOUT CTS •Cheque Truncation System (CTS) was pioneered by the Reserve Bank of India – RBI, for faster clearing of cheques. • Cheque Truncation is a system of cheque clearing and settlement between banks based on electronic data/images or both without any physical exchange of instruments. • CTS is designed to enable banks to handle more cheques electronically , which should make cheque processing faster and more efficient.
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  Infrastructure Required- Pointof Truncation • Image standard • Cheque scanner • Hardware • Software • Interface • Network
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  Working Group onCheque Truncation and E-Cheques Physical cheque will be truncated with in the Presenting Bank Point of truncation will be decided by each individual member Bank Settlement will be generated on the basis of current MICR code line data. Grey scale Technology will be deployed for imaging. Images will be preserved for 8 years A Centralized agency per clearing location will act as an image warehouse for the Banks. Public key infrastructure will be deployed to protect image and data flow over the Network.
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  WORKING OF CTS •In the earlier system you presented the cheque to the bank which sent the cheque to the clearing house, after which money would be credited to your account. • It usually take 3-4 days for the physical transfer of cheques and amount to transfer. • CTS clears cheques electronically. • Physical transfer of cheques between banks has ended. • Now it on average takes 1 day to clear and transfer the amount.
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  CHEQUE TRUNCATION SYSTEMFORMAT
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  Benefits of CTS
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  Business Opportunities -Banks • Improved handling of post-dated cheques deposited by the customer, as the images can be scanned and stored and the system can automatically process the scanned images on the due date. • Improved business intelligence systems can be put in place. • Introduction of new payment system products like e-cheques • Better funds management • Reduction in Transaction cost • Better management of space and manpower • Improved regulatory compliance. • Improved Management Information Systems which will facilitate better decision making.
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  Business Opportunities -Vendors •Upgrade of Technology opens up new business opportunities for vendors and solution providers • Can improve the Brand image of their products by providing improved functionalities for image capture, storage and retrieval. • Scope for improvement in processing capabilities , especially scanners and servers.
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  LEGAL ISSUES INVOLVED -Amendments made in Negotiable Instrument Act, Information Technology Act - Onus of verifying the Genuineness of the Cheque will shift to the stage at which it is presented - KYC norms are to be meticulously complied by the Banks, as circulated by RBI - Drawee Bank will continue to verify the signature and availability of funds - Drawee Bank will have the right to seek further information on the veracity/ genuineness of the cheque. - Drawee Bank can also seek the physical instrument for verification
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  CONCLUSION CTS is amove in the right direction and will ensure • Efficiency • Transparency • Security and • faster credit of funds benefiting both you as well as your bank. • Hurdles due to jurisdiction and geographical restrictions will be obviated and you can have faster access to your funds. • It’s a win-win situation for banks as well as you.