Compiled By: Vishal Chopra Cheque Truncation System

2 Cheque Truncation System - Concept  Movement of the physical instrument is curtailed  Image of the payment instrument is captured along with MICR data simultaneously  Clearing Process completed based on Electronic data and image of the Cheques

3 Benefits of the CTS  Facilitate Banks to increase productivity and avail all the benefits of smarter technology of Electronic Cheque Presentment  Better Operational efficiency  Faster clearing cycle of payment instruments  Cost saving in terms of storage and transport cost  Optimal Customer satisfaction

4 Point of Truncation Originating Branch ATM / Customer Location An identified Branch for a Cluster of Branches Service Bureau Service Branch of Originating Bank

5 Factors to decide point of Truncation Infrastructure required Capital Cost for set up Recurring Costs Distance of the Originating branches from the point of truncation Technology used Volume of Cheques / images that will be processed Facilities available for storing the cheques & images and their retrival

6 Infrastructure Required- Point of Truncation PC with printer Scanner Network The configuration of scanner will depend on the volume of Cheques ( Documents per minute) - Approximate capacity – 30 documents per minute (dpm)

7 Truncation Capacity of scanner - Documents per minute Storage of Images – ( Size of 3 prescribed images along with Digital Signature – 75 KB ) Front Gray Scale, Front Black & White and Reverse Black and White

Cheque Transaction P - Paying Bank C - Collecting Bank Debits Credits Clearing System Draws A (Drawer) B (Payee)

Negotiation Negotiation means that a cheque or other ‘negotiable’ instrument can be passed from one person to another - in effect the holders are passing a debt from one to another

Negotiation - Crossings A crossing tells the holder of a cheque that it can or cannot be negotiated. It appears on the face of the cheque. Now most cheques are crossed so as to prevent negotiation.

Negotiation - Crossings Open cheque - can pay bearer in cash Bradleys Bank Date Pay………………………or order £ the sum of……………………….. Signed

Negotiation - Crossings & Co - must be paid into a bank account Bradleys Bank Date Pay………………………or order & Co £ the sum of……………………….. Signed

Negotiation - Crossings A/c payee can only be paid into the payees bank account, takes away the negotiability Bradleys Bank Date Pay………………………or order a/c payee only £ the sum of……………………….. Signed

Negotiation - Crossings Not negotiable - takes away negotiability Bradleys Bank Date Pay………………………or order Not negotiable £ the sum of……………………….. Signed

Negotiation - Crossings Crossing opened by drawer - negotiable Bradleys Bank Date Pay………………………or order a/c payee only £ OpenCrossing A Person the sum of……………………….. Signed

Negotiation - Crossings Crossing opened by drawer - negotiable Bradleys Bank Date Pay.. An Other ………………or order a/c payee only £ OpenCrossing A Person the sum of……………………….. Signed A Person

Cheque Crossings Required 2 parallel transverse lines; or 2 parallel transverse lines with the words not negotiable between, or substantially between, the lines Just putting the words not negotiable is NOT ENOUGH

Effect Of Crossing A Cheque A direction by drawer to drawee not to pay the cheque otherwise than to a financial institution Cheque cannot be cashed Acts as a safeguard against fraud Makes the cheque easier to trace A crossing may be added to a cheque by drawer or any body else in possession of cheque

Dishonored Checks A check that the bank refuses to pay Reasons for a check being dishonored: Check is altered Signature not on file amounts written in words and figures do not match Postdated check a “stop payment” order has been issued Insufficient funds

Dishonor of a cheque on grounds of insufficiency of funds Sec. 138 to 142 of the Negotiable instrument Act provide for criminal penalties in the event of dishonor of cheques for insufficiency of funds. The drawer, under Sec. 138, may be punished with imprisonment up to 2 years or with a fine upto twice the amount of cheque or with both