Cheque Truncation Policy to be adopted across the country by April 2013
With the RBI clearing the Cheque Truncation Policy, Indian banks are all set to witness a revolution in terms of cheque clearance. This technology, introduced in the National Capital Region from Feb 1, has met with roaring success. The technology will soon be incorporated in the rest of the country.
How Cheque Truncation system Works?
Cheque Truncation enables cheque clearing on the same day, thereby cutting down on the floating time available for funds. It involves sending images instead of paper cheques for clearance. While on the one hand it has benefited customers and banks alike, on the other, it has helped reduce frauds related to cheque clearance. Prior to this, it took two to three days for a cheque to clear within a city. The biggest benefits will be witnessed in inter-city clearance. What normally took 15 days to clear will now be done in minutes. With this system in place, bank workload in the NCR has come down significantly leading to unprecedented efficiency.
The US-based NCR Corp was mandated by the Reserve Bank of India to implement the project for the NCR. After running the project for a few months, NCR corp delivered it to the RBI recently. The RBI has started the project with 10 banks. These include the ICCI Bank, Punjab National Bank, State Bank of India and Standard Chartered. With the successful integration of this new system into banking processes, the RBI plans to bring 10 more banks into the loop on a weekly basis.
It is expected that by March-April, most banks will have this system in place. The RBI has set a cut-off date for banks to move to the truncation platform. However, this process will run parallel to the paper cheque clearance process.
This new system will reduce the floating time available for banks and thereby bring efficiency into the system. Besides reducing frauds, it will cut down on the manpower required at a branch to take care of this activity. It is also expected to bring down the operating costs.
In the Indian context, the new system is revolutionary because the volume of cheque that India handles on a daily basis is enormous. On an annual basis, Indian banks process around 1.2 billion cheques. The NCR processes around 6,00,000 cheques a day.
Government agencies and large corporate houses which handle checks in mammoth numbers can send scanned images, instead of physical cheques, to the branch concerned, which would then forward it to RBI for settlement.
In due course it would be possible to carry out truncation through ATMs. By inserting the cheque in a machine it would be possible to capture images that would be forwarded to the bank for settlement. The ATM would provide customers a receipt to confirm the deposit of cheque.