What is Cheque Truncation & How it works?

chequeCheque Truncation System (CTS) is used by the banks to stop the movement of a physical cheque from the bank where it is presented to the bank which had issued it.Under this system, an electronic image of the cheque is transmitted to the drawee branch along with the necessary information inputs like Magnetic Ink Character Recognition (MICR) code, date of presentation and details of the bank presenting the cheque. The new system of Cheque Truncation will cut the time that was earlier consumed in the physical movement of cheques from presenting branch to the drawee branch. At present, the outstation cheques take around seven days to get cleared. Once the system is in force in the whole country, it will take one or two days to clear a cheque. The settlement cycles of the bank will also be drastically reduced. There will be no fear of loss or damage to the cheque in physical transfer. Alteration in cheque is not accepted in this system.