News Excerpt:

The RBI has introduced a new initiative for Continuous Clearing of Cheques under the Cheque Truncation System (CTS) to speed up the cheque clearance process.

More detail about news:

• RBI Governor announced transition from batch processing to continuous clearing with 'on-realisation-settlement' in monetary policy.
• Cheques will now be scanned, presented, and cleared within a few hours on a continuous basis during business hours, reducing the clearing cycle from the existing T+1 days (two-day processing time) to just a few hours.

Objective of Continuous Clearing:

• The objective of this initiative is to enhance cheque clearing efficiency, minimize settlement risks for participants, and improve the overall customer experience.

What is Cheque Truncation?

• Cheque truncation refers to the process wherein in place of the physical cheque, an electronic image of the cheque, along with the required information, is sent to the paying branch through the clearing house.
• This process eliminates the need to physically transport cheques between bank branches, except in rare circumstances, thus reducing costs, shortening the collection time, and streamlining cheque processing.
• Only cheques compliant with the CTS-2010 standards can be cleared through CTS.

CTS-2010 standards:

• The CTS-2010 standards aim to standardize cheques issued by banks across the country, incorporating mandatory minimum-security features such as quality paper, watermark, invisible ink bank logos, and void pantographs.

Are Non-CTS Cheques Invalid?

• Banks have been instructed to issue only CTS-2010 standard-compliant cheques since September 30, 2012.
• Separate clearing sessions for non-CTS cheques were discontinued on December 31, 2018.
• Currently, non-CTS cheques cannot be processed through CTS, and banks have been advised to withdraw non-CTS cheques from customers.
• However, non-CTS cheques are still valid as negotiable instruments.

Benefits of CTS for Customers:

• CTS provides faster and more cost-effective fund realization compared to traditional methods. Corporates, if needed, can request images of cheques from their bankers for internal purposes.

Current Status of CTS Implementation in India:

• CTS was implemented in New Delhi, Chennai, and Mumbai in 2008, 2011, and 2013, respectively.
• After the migration of all cheque volumes to CTS, traditional cheque clearing methods were discontinued nationwide. Banks have been advised to ensure that all branches are connected to CTS.
• Cheque processing locations in India are now consolidated into three grids: Chennai, Mumbai, and New Delhi.
• Each grid provides processing and clearing services to all banks within its jurisdiction.

"One Nation, One Grid" Project:

• The "One Nation, One Grid" project aims to merge the three existing CTS grids into a single national grid.
• This unified grid will offer customers faster realization of outstation cheques and provide banks with easier fund management, streamlined infrastructure, and overall efficiency improvements.