What is CTS in banking terms. What is its presence in Indian Banking?

Question

What is CTS in banking terms. What is its presence in Indian Banking?

Answer 1

It is the, Cheque Truncation System (“CTS”) introduced by RBI since March 31, 2006. The new CTS is the RBI’s version of a secure, reliable, efficient and time-effective payment system.

The CTS, is a payment system through which the transactions are settled on the basis of images and electronic data without the actual and physical movement of the financial instruments. It, therefore, eliminates, to a large extent, the movement of cheques in the cheque clearing cycle. The clearing cheque is truncated/settled at the presenting bank itself. A CTS allows a financial institution (for example: a bank) to truncate cheques at the ‘Point of Capture’ by providing the capabilities of presenting cheques to the ‘Paying Bank’ electronically and also to process return cheques electronically. The importance of an efficient and well organized CTS can be ascertained from the fact that even today in India, physical cheques account for approximately 80 (eighty) percent of all transactions, and the electronic mechanisms, including credit cards, account for only about 20 (twenty) percent. The RBI claims that its new CTS is the first project in the world incorporating all the three components of CTS — proof of deposit, settlement, and an eight-year-long archive.