The cheques of other banks (Drawee Bank) that you deposit to your bank for credit of your account reaches the Drawee Bank through local Clearing House . Clearing House is the arrangement among bankers to deliver the cheques of other banks and recive cheques of its own from other banks (ie) Exchange of cheques among the participating bankers.All banks maintains accounts with the bank conducting clearing house.The bank's account will get credit for the value of the cheques presented and debit for the value of its cheques received from other banks.The net amount will be credited to the account of the presenting bank.(For the sake of simplicity the cheques returned by drawee banks are not taken into account )
In the existing system of cheque clearing by banks,the presenting banks ensures the physical delivery of the chequs to the drawee bank through the clearing house But in Cheque Truncation System ,the presenting bank captures the data and image of the cheques and sends the same to the drawee bank through the clearing house.Thus the physical movement of the cheques are avoded; presenting bank retains the cheques.
The new CTS enables the banks to switcher from local centre based clearing of cheques to Grid based clearing . Each grid will provide processing and clearing services to all the banks under its jurisdiction,. Banks, branches and customers based at small / remote locations falling under the jurisdiction of a grid would be benefitted, irrespective of whether there exists at present a formal arrangement for cheque clearing or otherwise the presenting bank (or its branch) captures the data (on the MICR band) and the images of a cheque using their Capture System the collecting bank (presenting bank) sends the data and captured images duly signed and encrypted to the central processing location (Clearing House) for onward transmission to the paying bank (destination or drawee bank)
The Clearing House processes the data, arrives at the settlement figure and routes the images and requisite data to the drawee banks. This is called the presentation clearing. The drawee banks through their CHIs receive the images and data from the Clearing House for payment processing. The drawee CHIs also generate the return file for unpaid instruments, if any. The return file / data sent by the drawee banks are processed by the Clearing House in the return clearing session in the same way as presentation clearing and return data is provided to the presenting banks for processing. The clearing cycle is treated as complete once the presentation clearing and the associated return clearing sessions are successfully processed .
As only data and images of the cheques are invloved ,limitation on account of geographical locations can be removed and multiple clearing locations can be merged. It will help to enlarge the clearing centers and also speed up the cheque clearing process. Frauds in cheques can be greatly reduced with the introduction of minimum security features like embedded verifiable features such as bar-codes, encrypted codes, logos, watermarks, holograms, etc., prescribed under CTS Standards 2010.
The benefits from CTS could be summarized as follows :
What is Cheque Standardisation and what does CTS 2010 Standard mean ? Standardisation of cheque forms (leaves) in terms of size, MICR band, quality of paper, etc., was one of the key factors that enabled mechanisation of cheque processing. Growing use of multi-city and payable-at-par cheques for handling of cheques at any branches of a bank, introduction of Cheque Truncation System (CTS), increasing popularity of Speed Clearing, etc., were a few aspects that led to prescription of certain minimum security features in cheques printed, issued and handled by banks and customers uniformly across the banking industry
The homogeneity in security features is expected to act as a deterrent against cheque frauds, while the standardisation of field placements on cheque forms would enable straight-through-processing by use of optical / image character recognition technology. The benchmark prescriptions are collectively known as "CTS-2010 standard". Indian Banks Association (IBA) and National Payments Corporation of India (NPCI) are co-ordinating with the banks on implementation of the new standard. Accordingly, the cheques issued are tested and certified by NPCI and only after such cerification the cheques would be issued to the customers.
No changes / corrections can be carried out on the cheques (other than for date validation purposes, if required). For any change in the payee’s name, courtesy amount (amount in figures) or legal amount (amount in words), fresh cheque leaves should be used by customers. They should preferably use dark coloured ink while writing cheques .Source:Reserve Bank of India
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