Highlight: Banks new check system check truncation system. ALL banks need to implement by September. This system started from the year 2010, but so far it has been implemented in only 1,50,000 branches. But now according to the new instructions of the Reserve Bank, this system will have to be implemented in all branches of all banks.
The Reserve Bank of India has directed all banks to implement Check Truncation System (CTS) by September 30, 2021 in all their branches. This will speed up check clearance in the country.
This system started from the year 2010, but so far it has been implemented in only 1,50,000 branches. But now according to the new instructions of the Reserve Bank, this system will have to be implemented in all branches of all banks.
What did the Reserve Bank say
In a circular sent to the chairman and managing director of all banks, the Reserve Bank has said, ‘It has been observed that many branches of banks have been kept out of some kind of formal clearing system. Due to this, their customers are facing difficulty, because time is more and the cost of collection of the check is also high. In order to increase the availability of CTS and provide a uniform customer experience to customers from all places, all banks will have to ensure that image-based CTS is implemented by September 30, 2021 in all their branches.
What is 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, but it is cleared only by taking a photo of the check. In fact, in the old system, from where the check is presented, the drawee travels to the bank branch. This way it takes time to clear.
In place of the check in CTS, an electronic photo of it is sent to the drawee branch from the clearing house. Along with this, information related to MICR band, date of presentation, details of the presenting bank are also sent.
What are the advantages
The check truncation system makes the process of check collection faster. This helps in providing good services to the customers. Due to the immediate clearing of the check amount, the customer needs are met in a timely manner. This reduces the cost. Reduces problems associated with logistics. This benefits the entire banking system.