Cheque Clearing Systems - Cts - the Initial Journey - India

PAYMENT & SETTLEMENT SYSTEM

PAYMENT AND SETTLEMENT

SYSTEM is a mechanism for

settlement of financial

transactions between

participants. The entire

operational process and

legal sanctity of settlement is

facilitated by a system Pan

India which is monitored and

controlled by Reserve Bank

of India as per provisions of

‘The Payment and

Settlement Systems Act,

2007.

 CHEQUE TRUNCATION SYSTEM

 Replacement to MICR clearing systems.

 Physical movement of cheques are restricted within

collecting bank only.

 Digitally signed scanned images of cheques are

transmitted from collecting bank to respective drawee

banks.

 “A truncated cheque” means a cheque which is

truncated during the course of a clearing cycle, either by

the clearing house or by the bank whether paying or

receiving payment, immediately on generation of an

electronic image for transmission, substituting the further

physical movement of the cheque in writing.[Section 6 - I

(b) of NI Act, 1881]

 National Payments

Corporation of India • The Board constitutes

(NPCI) was of Shri N. R. Narayana

incorporated in Murthy, Chairman,

December 2008 as a Infosys Technologies

Section 25 company Ltd as the Chairman,

under Companies Act. Nominee from

There are ten core Reserve Bank of

promoter banks State India, Nominees from

Bank of India, Punjab ten core promoter

National Bank, Canara banks and Shri

Bank, Bank of Baroda, A.P.Hota, Managing

Union bank of India, Director and Chief

Bank of India, ICICI Executive Officer,

Bank, HDFC Bank, NPCI.

Citibank and HSBC.

 Amendments to NI Act, 1881

Various sections of Negotiable Instruments Act, 1881

has been amended to take care of the legal

sanctity and implications of Cheque Truncation

System .U/s 6,64,81,89 and 131.

 Section 6

Definition of ‘Cheque’ is amended as follows:

A “cheque” is a bill of exchange drawn on a

specified banker and not expressed to be payable

otherwise than on demand and it includes the

electronic image of a truncated cheque and a

cheque in the electronic form.

 Section 6 – Explanation I (a)

inserted

The following ‘Explanation’ is inserted:

(a) “a cheque in the electronic form” means a cheque which

contains the exact mirror image of a paper cheque, and is

generated, written and signed in a secure system ensuring the

minimum safety standards with the use of digital signature

(with or without biometrics signature) and asymmetric crypto

system.

 Section 6 – Explanation I (b)

inserted

The following ‘Explanation’ is inserted:

(b) “A truncated cheque” means a cheque which is truncated

during the course of a clearing cycle, either by the clearing

house or by the bank whether paying or receiving payment,

immediately on generation of an electronic image for

transmission, substituting the further physical movement of the

cheque in writing.

 Section 6 – Explanation II

inserted

Explanation II.—

For the purposes of this section, the expression “clearing

house” means the clearing house managed by the Reserve

Bank of India or a clearing house recognized as such by the

Reserve Bank of India.

 Section 64 (2) Inserted

(2) Notwithstanding anything contained in section 6, where an

electronic image of a truncated cheque is presented for

payment, the drawee bank is entitled to demand any further