• By Mayukh Debnath
  • Thu, 08 Aug 2024 09:04 PM (IST)
  • Source:IANS
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Cheque Clearance Time: The time taken in the clearance of cheques will soon be reduced to a few hours from the present 2-3 working days, according to Reserve Bank of India (RBI) Governor Shaktikanta Das.

"At present, cheque clearing through Cheque Truncation System (CTS) operates in a batch processing mode and has a clearing cycle of up to two working days. It is proposed to reduce the clearing cycle by introducing continuous clearing with 'on-realisation-settlement' in CTS," he said during the Monetary Policy Committee meeting on Thursday.

"This means that cheques will be cleared within a few hours on the day of presentation. This will speed up cheque payments and benefit both the payer and the payee," Das added.

WHAT IS CHEQUE TRUNCATION?

Truncation is the process of replacing the flow of the physical cheque issued by a drawer from the presenting bank to the paying bank branch. Instead of the physical cheque, the paying branch receives an electronic image of the cheque from the clearing house, which transmits the relevant information such as the MICR band, date of presentation, and the presenting bank.

BENEFITS OF CTS IN CHEQUE CLEARANCE

CTS thus obviates the need to move the physical instruments across bank branches, other than in exceptional circumstances for clearing purposes. This effectively eliminates the associated cost of movement of the physical cheques, reduces the time required for their collection and expedites cheque processing.

CTS enables quick and cheap realisation of funds to customers as compared to traditional methods that entail physical movement. Under grid-based CTS clearing, all cheques drawn on bank branches falling within the jurisdiction of the grid are treated and cleared as local cheques.
 
No outstation cheque collection charges are to be levied if the collecting bank and the paying bank are located within the jurisdiction of the same CTS grid even though they are located in different cities.

(With inputs from IANS)