Updated as on October 31, 2022)

1. What is Cheque Truncation?

Truncation is the process of stopping the flow of the physical cheque issued by a drawer at
some point by the presenting bank en-route to the paying bank branch. In its place an
electronic image of the cheque is transmitted to the paying branch through the clearing
house, along with relevant information like data on the MICR band, date of presentation,
presenting bank, etc. Cheque truncation 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 brings elegance to the entire
activity of cheque processing.

2. Briefly explain the entire process flow in Cheque Truncation System (CTS).

In CTS, the presenting bank (or its branch) captures the data (on the MICR band) and the
images of a cheque using their Capture System (comprising of a scanner, core banking or
other application) which is internal to them and meeting the specifications and standards
prescribed for data and images under CTS.

To ensure security, safety and non-repudiation of data / images, end-to-end Public Key
Infrastructure (PKI) has been implemented in CTS. As part of the requirement, the
collecting bank (presenting bank) sends the data and captured images duly signed digitally
and encrypted to the central processing location (Clearing House) for onward transmission
to the paying bank (destination or drawee bank). For participating in the clearing process
under CTS, the presenting and paying banks use either the Clearing House Interface (CHI)
or Data Exchange Module (DEM) that enables them to connect and transmit data and
images in a secure and safe manner to the Centralised Clearing House (CCH).

The Clearing House processes the data, arrives at the settlement, and routes the images and
requisite data to the paying banks. This is called presentation clearing. The paying banks
through their CHI / DEM receive the images and data from the CCH for further processing.

The paying bank’s CHI / DEM also generates the return file for unpaid instruments, if any.
The return file / data sent by the paying banks are processed by the Clearing House in the
return clearing session in the same way as presentation clearing and return data is provided
to the presenting banks for processing.

The clearing cycle is treated as complete once the presentation clearing and the associated
return clearing sessions are successfully processed. The entire essence of CTS technology
lies in the use of images of cheques (instead of the physical cheques) for payment
processing.

3. What type of instruments can be presented for clearing through CTS? What
is CTS-2010 Standard Cheque?
Only CTS-2010 standards compliant instruments can be presented for clearing through
CTS.

CTS-2010 standards contain certain benchmarks towards achieving standardization of

cheques issued by banks across the country. These include provision of mandatory
minimum-security features on cheque forms like quality of paper, watermark, bank’s logo in
invisible ink, void pantograph, etc., and standardisation of field placements on cheques. The
minimum-security features and standardisation help presenting banks while scrutinising /
recognising cheques of drawee banks in an image-based processing scenario.

4. Are non-CTS cheques invalid?

Banks have been advised to issue only CTS 2010 standard compliant cheques from
September 30, 2012. Earlier, there were septate clearing sessions for non-CTS cheques.
However, they were discontinued with effect from December 31, 2018. As of now, nonCTS
cheques cannot be presented in CTS. Bank have been advised to withdraw the nonCTS
cheques from the customers. However, non-CTS cheques remain to be valid as a negotiable
instrument.

5. What are the benefits of CTS to customers?

CTS enables fast and cheap realisation of funds to customers as compared to traditional
mechanisms. Under grid-based CTS clearing, all cheques drawn on bank branches falling
within in the grid jurisdiction are treated and cleared as local cheques. No outstation cheque
collection charges 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.

CTS also benefits issuers of cheques. The Corporates if needed can be provided with images
of cheques by their bankers for internal requirements, if any.

6. What is the status of CTS implementation in the country?

CTS has been implemented in New Delhi, Chennai, and Mumbai with effect from February
1, 2008, September 24, 2011, and April 27, 2013 respectively. After migration of the entire
cheque volume to CTS, the traditional mechanisms of cheque clearing have been
discontinued across the country. Further, banks have been advised to ensure that all
branches are connected to CTS.

Under CTS, cheque processing locations in India are consolidated into the three grids in
Chennai, Mumbai and New Delhi.

Each grid provides processing and clearing services to all the banks under its respective
jurisdiction. Banks, branches, and customers based at small / remote locations falling under
the jurisdiction of a grid would be benefitted, irrespective of whether there exists at present
a formal arrangement for cheque clearing or otherwise. The illustrative jurisdiction of the
three grids is indicated below:

Chennai Grid : Andhra Pradesh, Telangana, Karnataka, Kerala, Tamil Nādu, Odisha, West Bengal,
Assam and the Union Territory of Puducherry.
Mumbai Grid : Maharashtra, Goa, Gujarat, Madhya Pradesh and Chhattisgarh.
New Delhi Grid : National Capital Region of New Delhi, Haryana, Punjab, Uttar Pradesh,
Uttarakhand, Bihar, Jharkhand, Rajasthan and the Union Territory of Chandigarh.

7. What is “One Nation, One Grid” project?

Under the One Nation, One Grid project, three CTS grids explained above are to be merged
to create a single grid for the nation. Single grid shall benefit customers with faster
realisation of outstation cheques. It shall also benefit banks with easier fund management,
streamlining of infrastructure and overall efficiency improvements.

8. What care should be taken by customers while writing cheques?

There are three images of each cheque that are taken in CTS – front Gray Scale, front Black
and White and back Black and White. Customers should use image friendly coloured ink to
write cheques to facilitate clear image of written information. Further, customer should use
permanent ink to prevent fraudulent alternation of contents later. However, Reserve Bank of
India (RBI) has not prescribed specific ink colors to be used to writing cheques.

Customer should also be aware that cheques with alteration / modification are not accepted
under CTS. No changes / corrections can be carried out on the cheques (other than for date
validation purposes, if required). For any change in the payee’s name, courtesy amount
(amount in figures) or legal amount (amount in words), fresh cheque leaves should be used
by customers. This would help banks in identifying and controlling fraudulent alterations.

9. What is Positive Pay System for Cheques?

Positive Pay System (PPS) for CTS is an additional indicator provided by NPCI to all banks
to facilitate the clearing process and pre-empt cheque-related frauds and shall form part of
prudent practices followed by banks for payment processing. It has been introduced to
augment customer safety in cheque payments and reduce instances of fraud occurring on
account of tampering of cheque leaves.

Banks have been advised to enable PPS facility for all account holders issuing cheques for
amount of ₹ 50,000 and above. While availing of this facility is at the discretion of the
account holder, banks may consider making it mandatory in case of cheques for amounts of
₹ 5,00,000 and above.

10. What are the precautions required to be taken by the banks in CTS?

Banks should exercise care while affixing stamps on the cheque forms, so that it does not
interfere with the material portions such as date, payee’s name, amount, and signature. The
use of rubber stamps, etc., should not overshadow the clear appearance of these basic
features in image. It is necessary to ensure that all essential elements of a cheque are
captured in an image during the scanning process and banks / customers have to exercise
appropriate care in this regard.

Banks are also required to verify the security features additional to CTS-2010 standard that
have been voluntarily implemented
11. If a customer desires to see the physical cheque issued by him for any
reason, what are the options available?

Under CTS the physical cheques are retained at the presenting bank and do not move to the
paying banks. In case a customer desires, banks can provide images of cheques duly
certified/authenticated. In case, however, a customer desires to see / get the physical cheque,
it would need to be sourced from the presenting bank, for which a request has to be made to
his / her bank. An element of cost / charge may also be involved for the purpose. To meet
legal requirements, the presenting banks which truncates the cheques need to preserve the
physical instruments for a period of 10 years.

These FAQs are issued by the Reserve Bank of India for information and general guidance
purposes only. The Bank will not be held responsible for actions taken and/or decisions
made based on the same. For clarifications or interpretations, if any, one may be guided by
the relevant circulars and notifications issued from time to time by the Bank.