The Reserve Bank today said that the Cheque Truncation System (CTS), which is currently operational at the major clearing houses of the country, will be made operational across India by September 2020. "The Cheque Truncation System (CTS) has stabilised well and it has made large efficiency gains. In view of this, a pan India CTS will be made operational by September 2020," the RBI said today.
Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point by the presenting bank en-route to the paying bank branch.
In its place an electronic image of the cheque is transmitted to the paying branch through the clearing house, along with relevant information like data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments across bank branches, other than in exceptional circumstances for clearing purposes.
This effectively eliminates the associated cost of movement of the physical cheques, reduces the time required for their collection and brings elegance to the entire activity of cheque processing.