Effective Implementation of Cheque Truncation System in Idbi Bank, New Delhi

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1. INTRODUCTION We all live in a world where we want eveyrthing instant be it Instant coffee, instant entertainment, instant information. Time is the single biggest factor in this “instant” world we live in. So how could banking stay unaffected? After anytime money and Internet banking, we now have instant cheque clearance. Image based cheque clearing system or Cheque Truncation System (CTS) is a project undertaken by Central banks of many countries such as India (Reserve Bank of India – RBI), UAE (Central bank), Saudi Arabia (Saudi Arabia Monitoring Agency – SAMA) etc. for faster clearing of cheques. CTS promises to bring multiple benefits to customers by substantially reducing the time taken to clear the cheques as…show more content…
This bottleneck had an overriding impact on any consideration for improvements or reduction in the cycle time for clearing. Legal covenants in India required the cheque to be presented to the paying branch for payment. The paying branch is the last node in the clearing cycle as it exists in the country, and thus the paper cheque is on the move through the entire cycle from the bank-branch of the collecting bank where it is first deposited to the service branch of the collecting bank, onward to the Clearing House, which acts as a focal point for the cheques of all the banks, and from the Clearing Centre to the paying bank service branch and lastly the paying branch. If the cheque is returned unpaid, it has to re-trace the entire path back to the presenting branch. THE CONVENTIONAL WAY o Cheques dropped off in the bank or the drop box are subject to the cut-off time for clearing cycles. o After encoding and mechanical sorting, the cheques are sent to the clearing house. Banks release credit to the beneficiaries only after the return clearing process. o Time taken to clear local cheques: up to three days. o Time taken to process intercity cheques: a fortnight on an average. 2.3 REPLACING A WEAK SYSTEM The existing system restricts the speed at which the physical cheque travels to the destination branch and there has to be

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