As part of a significant effort to make conducting business in the nation easier, the RBI wants to cut the amount of time needed to clear bank checks from several hours to a few hours, RBI Governor Shaktikanta Das announced on Thursday.
As of right now, the Cheque Truncation System (CTS) allows for batch processing of checks, with a clearing cycle of up to two business days. According to Das, continual clearing with “on-realization-settlement” in CTS is suggested as a way to shorten the clearing cycle.
This implies that on the day of presentation, checks will be cleared in a few hours. The RBI head continued, “This will expedite check payments and benefit both the payer and the payee.”
The act of substituting the physical movement of a check issued by a drawer from the presenting bank to the paying bank branch is known as “cheque truncation.” Rather of the actual check being mailed, the clearing house transmits an electronic image of the check together with pertinent details including the presenting bank, date of presentation, and MICR band to the paying branch.
Therefore, unless there are special circumstances for clearing, there is no need to transfer the actual instruments between bank branches thanks to check truncation. This expedites the processing of checks, cuts down on the time needed for their collection, and effectively removes the related expense of moving the physical checks.
As opposed to conventional procedures that require physical mobility, CTS allows for the speedy and inexpensive realization of cash to clients. All checks made on bank branches that are under the grid’s jurisdiction are handled and cleared as local checks under grid-based CTS clearing. If the paying and collecting banks are in different cities but fall under the same CTS grid’s authority, there shouldn’t be any out-of-town check collection fees.
