The second major initiative in the guise of smoothening the process of cheque clearing was announced by RBI Governor Shaktikanta Das on Thursday. It is about bringing down the cheque clearing time to just a few hours, which would be a quite perceptible change in the ways of ease of doing business in the country. Currently, when cheques are processed under the Cheque Truncation System, it is done based on a batch processing system that leads to a cycle time of two working days at maximum.
He outlined a proposed shift to continuous clearing with 'on-realisation-settlement' under CTS. This approach, he added, will ensure same-day clearing of cheques on presentation, and the paying and receiving public at large will benefit by way of faster payment processing. Cheque truncation is a process whereby the physical movement of the cheque from the presenting bank to the paying bank branch is substituted by its electronic image. This image is sent to the clearing house with the included details of the MICR band, date of presentation, and the presenting bank information.
Cheque truncation reduces the costs associated with physical cheque transport from one branch to another, hence reducing collection time and time to process. In contrast to the traditional process involving physical movement, CTS helps settle funds quickly and at a lesser cost. Under a grid-based CTS system, cheques drawn on branches situated in the same grid are treated as local, meaning that no additional outstation collection fees apply, even if the collecting and paying banks are in different cities but are located within the same grid under CTS.
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