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What is CTS?

The Reserve Bank of India’s (RBI) Cheque Truncation Mechanism (CTS) is a cheque clearing system that allows for faster cheque clearance. Truncation, as the name implies, is the process of stopping the passage of a physical cheque on its approach to being cleared. Instead, an electronic image of the check will be made available with all the important information so that it can be transferred easily.

The Cheque Truncation System adds elegance to the entire process of cheque processing and clearing, while also providing several advantages to banks, such as time and cost savings, cost effectiveness, human resource rationalization, business process re-engineering, and improved customer service.

In September 2020, the Reserve Bank of India (RBI) introduced pan-India CTS to make check clearing safer and faster. All banks have been given until September 30, 2021 to deploy the Cheque Truncation System (CTS) in all of their branches across the country.

CTS will be a significant step forward in India’s digital transformation. For the banking industry, IMPS, RTGS, and NEFT were game changers.

All of this is due to the fact that in India, we are transitioning from an old to a new format for cheque clearance.

In the place of transferring a physical cheque in the cheque clearing procedure, the CTS system helps us to reduce this procedure. Instead, an electronic image of the check, together with other information, will be transmitted through a secured channel.

While the previous cheque standard was due to be phased out of circulation in 2013, the Reserve Bank of India (RBI) delayed the deadline to March 31, 2013, citing the need for more time to set up the systems by some banks.

If one has given any post-dated cheques to his banks for loan EMIs, he will need to replace them with fresh cheque leaves as part of the transition from the old system to the new cheque format. If one has any post-dated cheques that are past the 31st of March, he must arrange for them to be replaced with a new Cheque Truncation System cheque.

CTS is a time-saving method of clearing checks. It is, in reality, superior to the current way.

What is a Cheque Truncation System, and how does it work?

The Reserve Bank of India’s (RBI) Cheque Truncation Mechanism (CTS) is a cheque clearing system that allows cheques to be cleared more quickly. Truncation, as the name implies, is the process of stopping the passage of a physical cheque on its approach to being cleared.

Cheque truncation eliminates the requirement for physical instruments to be moved between branches. This successfully eliminates the associated costs of physical cheque movement, saves the time required for their collection, and adds beauty to the complete cheque processing activity.

The number 2010 in ‘CTS-2010’ refers to the year in which the Cheque Truncation System rules were published.

Why CTS?

In India, the Reserve Bank of India (RBI) has facilitated inter-bank and consumer payments online in near-real time using RTGS and NEFT. Even after that, still the 75 to 80 percent of all transactions are still made with physical cheques.

So, to cop up with this problem the RBI decided to to think of a way which will reduce the time of the check clearing cycle’s and improve its efficiency. As a result, providing CTS is an option. Clearing is a highly fraud-prone business; hence CTS decreases operational risks in banking operations.

Account Holders Benefits

There is no risk of a cheque being lost in transit because there is no physical movement of cheques. When we use CTS cheques, we get faster clearance, a shorter clearing period, and faster credit to our account. With the help of this new system, the cheque will be able to clear within a time span of 24hr, it doesn’t matter whether it is local or outstation.

The most significant benefit is that CTS-compliant cheques are more secure than older cheques, making them less vulnerable to fraud. Additionally, as the system evolves, it is intended those numerous locations be integrated and that geographical limits in cheque clearance be removed.

As a result, there’s a probability that multi-city checks will be cleared on the same day in the future.

The advantages of CTS for banks can be described as follows:

  • Shorter clearing cycle
  • Better verification and reconciliation process
  • No jurisdictional constraints
  • Greater operational efficiency for both banks and clients
  • Lower operational risk and risks associated with paper clearing

To clarify, the CTS system limits the potential for fraud, which is beneficial to banks. Furthermore, eliminating the need to move real cheques saves both money and time for banks.

This will result in the standardization of bank-issued checks.

CTS is based on a cheque truncation or online image-based check clearing system, in which cheque images and magnetic ink character recognition (MICR) data are recorded and delivered electronically at the collecting bank branch.

Stopping the flow of physical cheques issued by a drawer to the drawee branch is known as cheque truncation. The physical instrument is truncated somewhere along the way to the drawee branch, and an electronic image of the check is transferred to the drawee branch together with pertinent information such as MICR fields, date of presentation, presenting banks, and so on.

In India, Nelito’s CTS has been effectively implemented in major public, commercial, and cooperative banks.

The solution is now being implemented in Myanmar by Team Nelito. Our solution complies with Myanmar’s National Payment and Settlement Systems rules and operates on the premise of the Central Bank of Myanmar’s Mechanical Clearing House System (MCH) (CBM).

Major advantages of CTS system.

  • CTS is more modern and secure, reducing the risk of cheques being misplaced in transit.
  • Physical transfer of cheques from banks to clearing houses saves time, money, and personnel; clearing-related frauds become less probable
  • It expedites the clearance of checks.
  • There are no additional charges for collecting checks written on a bank within the grid, and there are no geographical restrictions.

Highlights of Cheque Truncation System Cheques

  • All CTS cheques include a watermark that reads ‘CTS-INDIA’ and can be seen when held up to a light source.
  • In photocopies of a cheque, a panograph (wavelike design) with the hidden / embedded word ‘VOID’ becomes readily visible.


CTS was originally introduced by the Reserve Bank of India in the National Capital Region of New Delhi on February 1, 2008, with ten pilot banks, with a deadline of 30 April 2008 for all banks. On the 24th of September 2011, CTS was launched in Chennai. Traditional MICR-based cheque processing was phased out in the NCR and Chennai after the move to CTS.

Expected benefits of CTS for banks

Banks gain from CTS in a variety of ways, including a speedier clearing cycle, which means that the proceeds of a cheque can be realized on the same day. It provides improved customer service, better reconciliation/verification, and a larger customer window.

Because clearing local cheques is a high-cost, low-revenue activity, operational efficiency directly benefits banks’ bottom lines. Furthermore, by safeguarding the transmission path, it decreases operational risk. Data storage and retrieval are made simple with centralized picture archive solutions.

Errors are reduced when manual chores are reduced. Other advantages that bank gain from this technology include real-time tracking and visibility of cheques, reduced fraud, and secure picture transfer to the RBI.

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