Answer»
- Cheque Truncation speeds up collection of cheques and therefore enhances customer service, reduces the scope for clearing related frauds, minimizes cost of collection of cheques, reduces reconciliation problems, eliminates logistics problems etc. With the other major product offering in the form of RTGS, the Reserve Bank created the capability to enable inter-bank payments online real time and facilitate corporate customer payments.
- The other product, National Electronic Funds Transfer, is an electronic credit transfer system. However, to wish away cheques is simply not possible and that is the reason why the Bank DECIDED to focus on improving the efficiency of the Cheque Clearing Cycle. Cheque Truncation is the alternative.
- Moreover contrary to perceptions, Cheque Truncation is a more secure system than the current EXCHANGE of physical documents in which the cheque moves from one point to another, thus, not only creating delays but inconvenience to the customer in case the instrument is lost in transit or manipulated during the clearing cycle.
- In addition to operational efficiency, Cheque Truncation has several benefits to the banks and CUSTOMERS which includes introduction of new products, re-engineering the total receipts and payments mechanism of the customers, human resource rationalization, cost effectiveness etc.
- Cheque Truncation thus is an important efficiency enhancement initiative in the Payments Systems area, undertaken by RBI.
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