Full Form Of Cts Cheque Truncation System How Does It Work

Full Form of CTS – Cheque Truncation System

Role

The cheque Truncation System provides for the fast collection process of cheques by using the cheque’s electronic image to be cleared along with key data. It eliminates the need for physical movement of the cheques across the banks except in extraordinary circumstances. CTS’s role 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 processing.

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History

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

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

CTS has now been adopted throughout the country.

Process

Let’s discuss the following process.

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

Format

Some fields form important features of a CTS cheque.

Branch address along with bank IFSC on top of a cheque.Date in dd/mm/yy format in boxes.The printer’s name with CTS-2010 was written across the left side of the cheque.Pantograph placed below the 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).The 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 the clearing houseClearing HouseA clearinghouse is a mediator between two firms (which may or may not know each other) that are engaged in a financial transaction (wherein one party is a buyer & another party is the seller in the said transaction), taking the exact opposite positions for each firm and ensures that there is no risk of default in the transaction.read more involved too much cost and time. CTS eliminates the same.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 cheque’s physical presence 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.