The Reserve Bank of India (RBI) on Monday asked all banks to extend Cheque Truncation System (CTS) to all branches across the country by September 30. The move is expected to make cheque settlement faster in the country.
Under the CTS, instead of physical movement of a cheque issued by a drawer, an electronic image of the cheque is transmitted to the paying branch through a clearing house, along with relevant information like data on the MICR band, date of presentation, presenting bank, among others. This eliminates the associated cost of movement of physical cheques and reduces the time required for their collection.
Last month, the central bank had proposed to bring all bank branches under CTS by September 2021 to bring operational efficiency in paper based clearing and make the process of collection and settlement of cheques faster.
CTS is in use since 2010 and presently covers around 1,50,000 branches. All the erstwhile 1,219 non-CTS clearing houses have been migrated to CTS, effective September 2020.
"It is, however, seen that there are branches of banks that are outside any formal clearing arrangement and their customers face hardships due to longer time taken and cost involved in collection of cheques presented by them," RBI said in a circular addressed to chairman and managing directors (CMDs) and chief executive officers (CEOs) of banks.
To leverage the availability of CTS and provide uniform customer experience irrespective of location, all banks will have to ensure that all their branches participate in image-based CTS under respective grids by September 30, 2021, it said.
"They are free to adopt a model of their choice, like deploying suitable infrastructure in every branch or following a hub & spoke model, etc. and concerned banks shall coordinate with the respective Regional Offices of RBI to operationalise this," the circular said.
The banks will have to prepare a roadmap to achieve pan-India coverage of CTS and submit a status report to RBI before April 30.