Electronic Cheque Truncation Not Far

by Hanil Manghani    Jun 09, 2006

India is close to finally introducing Electronic Cheque Truncation (ECT) - a system that leverages technology to create and exchange electronic data and images of cheques for their presentation and clearance, thereby eliminating the need for physical movement of the same.

Currently, cheques are physically presented in clearinghouses across the country for transmission to the drawee banks and payments thereafter. This physical transportation is costly and time-consuming - a delayed outstation cheque may take as long as a fortnight to clear.

With amendments in the Sections 6 and 1(4), coupled with the introduction of 81 A to the Negotiable Instruments Act, 1881, ECT is now legalized. After initial implementation in the national capital region, it will spread gradually across the country, though the stipulated deadline for the phased commencement is December 31, 2006.

It will decrease the clearing cycle for a local cheque to about 5 hours, and outstation cheques from 1-2 weeks to a single day. This will result in fewer service issues related to lost cheques, improved customer service, lower processing costs, availability of real time clearing information, automated inward signature-verification process, reduction in frauds by analyzing data and information collected through the CTS and also by implementing KYC Norms laid down by RBI properly.

Cheque truncation involves the scanning of the front and the reverse sides of the cheque, while its Magnetic Ink Character Recognition (MICR) data is put in an excel logfile, and these are subsequently distributed to the relevant bank/ branch by the truncation software.

Many vendors, including NewGen have been hard at work, aggressively promoting their products. The Newgen Cheque Truncation System (CTS), an end-to-end solution for inward/ outward electronic cheque clearing, is built on top of its Business Process Management (BPM) platform.

Encryption and cryptographic standards of Newgen CTS ensures secure and reliable transmission. Cheque truncation technology can also be extended to process dividend warrants, printed drafts, gift cheques, etc.

The NEWGEN CTS product suite consists of:

* ChequeFlow: Multi-user workflow for medium-high volume processing at high volume branches/service branches
* ChequeFlow Lite: Single desktop for low volume processing at branches
* ChequeExchange: Sorting and settlement switch for central banks/ clearing house of banks
* OmniTransport: Data transfer solution

NCR’s end-to-end payment clearing system enables banks to truncate cheques at their branches, service branches, or service bureaus. It features three key components:

* ChequeMark Image Processing Solution: for image capture, image data entry and requisition, rule Based Signature/ web signature verification along with counterfeit/ fraud detection modules

* Electronic Cheque Presentment with Image Exchange (ECPIX): For secure exchange images of cheques, includes the Clearing House Solution and Clearing House Interface. It supports local and inter-city clearing, digital signing and authentications, image quality assurance and a clearinghouse Interface software

* ImageMark Archive: Storage of the cheque images as an enterprise-wide cheque and transactions image archive, with integrated security for image authentication

Canon is looking at the hardware angle, offering cheque scanners in two models - the CR 55 and the CR 180. While the CR 55 can scan 55 images in one minute and is priced at Rs1.05 lakh, the CR 180 can clear 180 cheques and is priced at Rs2.35 lakh.

Vendors like IBM, TCS and Infosys are among others who have joined the fray. BankServ, a US based provider of check processing, wire transfers, credit card processing and other payment solutions, has allied with Synergy Log-In to introduce its own system, DepositNOW in India.

While some banks like Bank of Punjab have already implemented the technology, its perceived that overall, banks are still not in a state of preparation to make the switch.