In simple terms, Cheque Truncation System, is ”Once deposited, the cheque is scanned and its electronic image transmitted through the entire clearing cycle, instead of the physical cheque itself.
The physical cheques are retained with the collecting bank, instead of the paying bank.
The basic doubt that arises amongst the common man, is what happens when a Cheque is dishonored under CTS?
Hence in ideal conditions, once the Cheque is dishonored under CTS, an Image Return Document (IRD) is generated and sent to the payee.
In many countries, where the CTS has been fully implemented, this IRD is a legal substitute for the dishonored cheque.
However, in our country CTS is still only functional in Delhi (NCR). Hence, an IRD will not solve the purpose. Further, if IRD are issued in the present scenario, there will be chaos at the Banks customer’s centers and branches
To overcome this issue, a-via medium was found out, which was implemented in our country.
In Delhi (NCR), once the cheque is dishonored, under CTS, the collection bank, removes the physical cheque from its possession and hands over to the customer along with the cheque return memo.
As it is, now also the Returned/dishonored cheques are returned to the collection banker by the paying banker, for onward transmission to the customer.
Hence, the end process to the customer remains the same, irrespective of whether the cheque is transmitted physically or through CTS.
For the IRD to be acceptable in our country, it will take a very long time, may be two decades or so.
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