CHEQUE TRUNCATION –
Business Opportunities
K.S. Bajwa,
General Manager –IT
Punjab National Bank
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Agenda
 Working group on Cheque Truncation and
E - cheques
 Cheque Truncation – Concept, Benefits,
Point of Truncation
 Business Process Re-engineering
 Legal Issues involved
 Image Service Bureaus – Business
benefits.
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Working Group on Cheque Truncation and Echeques
Physical cheque will be truncated with in the
Presenting Bank
Point of truncation will be decided by each
individual member Bank
Settlement will be generated on the basis of
current MICR code line data
Contd….
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Working Group on Cheque Truncation
and E-Cheques
Grey scale Technology will be deployed for
imaging
Images will be preserved for 8 years
A Centralised agency per clearing location
will act as an image warehouse for the
Banks
Public key infrastructure will be deployed
to protect image and data flow over the
Network
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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
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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
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Business Opportunities - Banks
• Improved handling of post-dated cheques
deposited by the customer, as the images can
be scanned and stored and the system can
automatically process the scanned images on
the due date.
• Improved business intelligence systems can be
put in place.
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Business Opportunities - Banks
• Introduction of new payment system products
like e-cheques
• Better funds management
• Reduction in Transaction cost
• Better management of space and manpower
• Improved regulatory compliance.
• Improved Management Information Systems
which will facilitate better decision making.
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Business Opportunities - Customer
• Faster realisation of Funds
• Better funds management
• Can avoid visit to the Branch as more outlets
will be available for depositing cheques for
clearing, at convenient locations.
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Business Opportunities -Vendors
• Upgrade of Technology opens up new
business opportunities for vendors and solution
providers.
• Can improve the Brand image of their products
by providing improved functionalities for
image capture, storage and retrieval
• Scope for improvement in processing
capabilities , especially scanners and servers
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Point of Truncation
•
•
•
•
•
Originating Branch
ATM / Customer Location
An identified Branch for a Cluster of Branches
Service Bureau
Service Branch of Originating Bank
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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
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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)
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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
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Business Process Reengineering
• System and Procedures are to be re-looked to enable the
Banks to work in electronic cheque processing environment
• Necessary guidelines to be issued to the Branches to enable
them to pass the cheque based on images instead of physical
cheques
• Process of return of cheques and it’s intimation is to be
devised.
• Responsibility of genuineness of the image of the cheque is to
be fixed since the drawee Bank will receive only the image of
the cheque and not the physical cheque
Contd..
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Business Process Reengineering
• As per amended NI Act, 1881 the Presenting
Bank will ensure Prima –facie security of various
mandatory fields of the cheque like date,
availability of signature and chemical/material
alteration
• Storage of physical cheque – As per amended NI
Act, drawee Bank can requisite for physical
cheques in case of need.
• System will require storage of cheque as per
“Banking Companies preservation of Records
Rules, 1985”. Point of storage of physical
cheques is to be decided
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Legal Issues involved
-Amendments made in Negotiable
Instrument Act, Information Technology Act
-Onus of verifying the Genuineness of the
Cheque will shift to the stage at which it is
presented
-KYC norms are to be meticulously
complied by the Banks, as circulated by
RBI
Contd17..
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Legal Issues involved
- Drawee Bank will continue to verify the signature
and availability of funds
Drawee Bank will have the right to seek further
information on the veracity/ genuineness of the
cheque
Drawee Bank can also seek the physical
instrument for verification
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Why Image Bureaus
• Smaller banks will not have sufficient volume
of cheques to justify capital investment
• Sufficient infrastructure may not be available
in the branch or service centre
• Operational costs for maintaining the system
may be relatively high if sufficient capacity
utilisation is not there.
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Image Service Bureaus
• Provide image capture, storage and retrieval
facilities to a group of Banks for a fee.
• High end systems are set up for faster image
capture, transmission, storage and retrieval .
• Adequate infrastructure put in place to manage
the Bureau.
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Business Benefits for set up of Image
Service Bureaus
• Source of Revenue
• Economy of Scale
• Improved Technology can be used as High end
systems can be put in place.
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Thank
you
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