The Cheque Truncation System (CTS) is an electronic cheque-clearing method introduced by the Reserve Bank of India (RBI) to speed up cheque processing, improve security, and reduce operational costs. Instead of physically transporting cheques, CTS captures cheque images and data at the presenting bank and sends them electronically to the drawee bank.
Key Benefits of CTS
1. Customer Service
- Extended cut-off time for cheque acceptance by banks
- Faster clearing and reduced settlement timelines
- Easy retrieval of cheque data and history
2. Operational Benefits
- MICR amount encoding not required
- Eliminates reconciliation differences – image and data travel together
- Prevents loss, tampering, or pilferage of cheques
- Enhanced security through CTS-2010 standards
3. Commercial Benefits
- Saves cost by removing physical paper movement
- Grid-based clearing enables better liquidity management
- Reduced risk of fraud with encryption and digital signatures
How CTS Improves Clearing Timelines
| Clearing Type | Pre-CTS Settlement Time | CTS Settlement Time | Benefit |
|---|---|---|---|
| Local Bank-Branch | T+2 days | T+1 day | 1 day faster |
| Other MICR Location (outstation) – Own Bank-Branch presence | T+4 days | T+1 day | 3 days faster |
| Other MICR Location (outstation) – Bank-Branch presence through | T+7 days | T+1 day | 6 days faster |
| Other MICR Location (outstation) – Bank-Branch No tie-up | T+10 days | T+1 day | 9 days faster |
T = Transaction Day
CTS Process Flow
- Customer deposits cheque at branch or collection box.
- Cheque image and data captured by the presenting bank.
- Data sent electronically to the drawee bank via a secure network.
- Drawee bank processes and clears the cheque.
- Settlement completed on a T+1 basis in most cases.
Do’s for CTS Cheques
- Use only CTS-2010 standard cheques (marking is on the left side).
- Write all details (name, date, amount) with the same permanent ink pen.
- Start writing the amount in words right after “Rupees” and end with “only”.
- Sign clearly in the designated space.
- Keep cheques secure and report any loss immediately.
Don’ts for CTS Cheques
- Don’t write below the MICR band at the bottom of the cheque.
- Don’t sign or give a blank cheque.
- Don’t use erasable ink or pencil.
- Don’t fold, pin, or staple the cheque.
- Don’t alter any field except the date (with countersign).
Source: https://www.npci.org.in/what-we-do/cts/product-overview
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FAQs
What is the main advantage of CTS for customers?
Faster cheque clearance—most cheques are cleared within one working day (T+1).
Can I still use my old non-CTS cheques?
No, banks accept only CTS-2010 compliant cheques.
How does CTS prevent cheque fraud?
Images and data are encrypted and digitally signed, preventing tampering during transit.
Does CTS work for outstation cheques?
Yes, CTS reduces outstation clearance from up to 10 days to just 1 day in most cases.
Who manages the CTS system in India?
The Reserve Bank of India regulates CTS, with clearing operations managed through regional grids.
