Full Form of CTS (Cheque Truncation System)| How Does it Work?

Full Form of CTS – Cheque Truncation System

The full form of CTS is Cheque Truncation System. It is a clearance system for cheques used by the Reserve Bank of India (RBI) for faster clearances of cheques. Instead of using the physical copy of the cheque to complete the clearance process, CTC uses the electronic image of the cheque along with relevant cheque details.

Role

Cheque Truncation System provides for the fast collection process of cheques by using the electronic image of the cheque to be cleared along with key data. It eliminates the need for physical movement of the cheques across the banks except in extraordinary circumstances. The role of CTS is to enable electronic processing of the cheques by using cheque images and relevant data which is captured by the presenting bank and forwarded to the paying bank for its processing.

History

Cheque Truncation System was implemented in the following states as follows:

New Delhi: From 1^st February 2008.
Chennai: From 24^th September 2011.
Mumbai: From 27^th April 2013.

CTS has been now adopted throughout the country.

Process

Let’s Discuss the following process.

Cheque clearance in CTS starts with the presenting banker capturing the data of the cheque along with its image using its internal capture system.
The presenting banker then sends the data along with the image of the cheque, being digitally signed and encrypted to the Clearing House to the paying bank for further process.
In order to carry out such interaction, the bankers make use of an interface named Clearing House Interface (CHI), by way of which the captured data and images can be transmitted. CHI then processes data and after taking on record the final amount of settlement, forward the images as well as data to the paying banker.
This process is known as Presentation Clearing. Paying bankers makes use of their CHI to receive the data for the processing of payment. The data is then processed by Clearing House in return clearing session and the return data is communicated to presenting banker. Once the presentation clearing and return clearing sessions are complete, the clearing of the cheque is completed.

Format

There are some fields that form important features of a CTS cheque.

Branch address along with IFSC of the bank on the top of a cheque.
Date in dd/mm/yy format inboxes.
Printer name with CTS-2010 written across the left side of the cheque.
Pantograph placed below account number which will show “Void/Copy” if someone takes a photocopy of the cheque.
Rupee symbol.
The words “Please sign above” are written on the bottom of the cheque.
The visible watermark “CTS India” (to be visible if the cheque is placed in light).
Ultraviolet logo of the Bank to be printed at the upper left corner of the cheque.

Advantages

The physical process of flowing the cheque from banks to clearing house involved too much of cost and time, the same is eliminated by CTS.
The risk of cheques being lost or stolen in transit is eliminated now.
The process used by CTS is very secure.
The time taken to clear the cheques has reduced significantly.
There are no limitations with respect to geographical locations with the use of electronic mode.

Conclusion

The use of the Cheque Truncation System in the banking sector has helped the customers as well as the bankers as a whole. The need for the physical presence of the cheque has been eliminated along with the risks involved in it. Also, a similar system is used by banking institutions and regulators across the globe. The clearance of cheques has become faster and secure now.