The Reserve Bank of India (RBI) has asked banks to implement the image based check truncation system in all other branches by 30 September. This step will speed up check clearing and improve customer services. There are still 18,000 bank branches that are separate from the formal check clearing or clearing system. The clearing system based on the image of the check reduces or eliminates the need to physically send checks from one place to another.
The Reserve Bank had announced the implementation of CTS (CTS) last month. Under this, all bank branches will be brought under image based clearing system. CTS has been in use since 2010. At present 1,50,000 bank branches are covered under this. All previous 1,219 clearing centers (ECCS centers) have been transferred under CTS from September 2020.
What is a check truncation system?
Check truncation is a process of clearing system checks. In this, the physical check issued does not have to roam from one place to another. The bank in which this check is presented travels from here to the drawee bank branch. This way it takes time to clear.
The Reserve Bank said that it has been seen that many bank branches are still outside the formal clearing system. Their customers have a lot of trouble due to this. It takes longer to get their check.
CTS will be applicable till 30 September
The Reserve Bank’s circular states that it has been decided to implement CTS in all bank branches across the country in order to utilize the availability of CTS and to provide an equal experience to all customers.
Under this, banks have to ensure that by September 30, 2021, their branches are covered under the image-based CTS system. Banks will be free to adopt any model for this. For this, banks can put proper structure in each branch or they can use the hub or spoke model.
Benefits of CTS
The check truncation system makes the process of check collection faster. Under the CTS, instead of sending the check from one bank to the other bank, the check is sent electronically. Due to the absence of the check from one place to the physical form, the cost is reduced and the time taken in the check collection is also reduced.
In addition to sending the electronic image of the check, in addition to sending the check physically from one place to another, there is a risk of it getting lost or damaged. But there is no such problem in CTS.