Core Banking

&
Cheque Truncation System

• Presenters:
• Pranav Aggarwal
• Ashish Goyal
CORE BANKING
 Core Banking
• Centralised Online Real-Time Exchange
• Software to support the most

common banking transactions

• Centralised Data Centres
• The deposits made by customer are reflected immediately
on the bank’s servers and then he could withdraw the
deposited money from any of the bank’s branches
 Elements of Core banking
• Making & Servicing Loans
• Opening New Bank Accounts
• Processing of Cash Deposits & Withdrawals
• Processing of Payments & Cheques
• Calculation of Interest
• Customer Relationship Management Activities
• Managing Customer Accounts
• Establishing Interest Rates
• Maintaining Records
 Features of Core Banking
• Scroll based browser screen
• Multilingual Operations are possible
• Information & Operations of daily Receivable & Payable
• Customer ID Concept can be implemented
• Facilitates in Data Export Facility
• Helps in auto generation of all kinds of charges
• User level based security
• Single Window Operation can be performed via Core Banking
 Advantages of Core Banking
• Limited Professional Manpower is used more efficiently and effectively
• Facilities of ATM, Internet Banking, M-Banking, Payment Gateways can be
offered
• Provides more strong & economical method of Management Information System
• Helps to reduce branch manpower
• Provides quick information availability for decision support
• Ensures instant & accurate implementation of bank policies
• Ensures increased speed in working resulting in enlarge business opportunities &
reduction in penalties, legal exp. etc. due to delay
 CHEQUE
TRUNCATION
SYSTEM
 Cheque Truncation System
• Reserve Bank of India-2008
• Main purpose of this project is to faster the clearing
of cheques in India
• Also called Image-Based Clearing System(ICS)
• It is also legally valid in India u/s 6(a) of negotiable
instruments act 2002.
 MEANING OF CTS.

Under this system, the collection

bank branch captures the cheque
images and transmits the cheque
electronically.

To stop the flow of physical

cheques issued by drawer to the Cheque
drawee branch. truncation
scanner
 1.On receipt of cheque, 2.After digital image is
the collecting bank created, cheque is sent
keeps it in custody. to clearing house.

3.Then the drawee bank

4.After image routing &
will verify the signature
processing, the image is
image with already held
sent to drawee bank.
sign.

5.The returned
PROCESS OF
instrument is given a
CTS.
identifier so that he can
represent the cheque.
 ADVANTAGES.
• Faster clearing cycle.

• Better customer services.

• Reduce operational risk.

• Reduced manual work.

• Better reconciliation and verification.

• No need for transportation of cheques.

• Reduced frauds.
 GUIDELINES.

• Stoppage of physical movement of cheque.

• Truncation model- RBI constituted an industry working group on
cheque truncation under chairmanship of Dr. B.R. Barman.
• Jurisdiction- It is proposed to be implemented in Delhi NCR. And
is subject to jurisdiction of new delhi bankers clearing house.
• Applicability of guidelines- same as section 6 of negotiable
instruments act.
 Contd.
• Clearing timings:
 CLEARING PROCEDURE AT
PRESENTING BRANCH.
• Preliminary verification- Member banks should use KYC.
They should observe all precautions which a prudent bank
should. Eg. Physical feel, tampering visible.
• Sorting of instruments- Banks should segregate ‘Drawn on
self’ and ‘on us’ cheques because CHIs are configured to
reject ‘on us’ items.
• Crossing- Prior to scanning, all the cheques should be
crossed with the banks special crossing stamp. Material
information should not be interfered.
• Capture of image and data- The image of instruments in a
batch must be duly captured along with MICR(Magnetic Ink
Character Recognition) data.
• Reject Repair & Balancing- The bank should have proper
systems and procedures to ensure that rejects of MICR are
properly repaired and balanced.
• Endorsement- At the time of scanning the instruments the
scanner will print a single line endorsement on the back of each
instrument which shall be a unique identifier for the instrument.
• Re-Presented Cheques- In case of represented instruments the
endorsement will be made in a different position to avoid
overlapping.
• Validations- The data captured by banks capture system
should be validated to avoid rejection at CHI.
• Govt. Cheque Validation- The scanner capture system
must detect the special case as mentioned in CHI
specification document. The special cases are: 1.
7-digit account no. and a 3-digit transaction code.
2. 6-digit account no.
and a transaction code in the range of 20-27 and 49
• Master Table Sync- The master table information should
be in sync. with clearing house master table.
• Image Quality Checking- Banks should perform IQA
validation at capture system.
• Handling IQA Failure- The instruments that fail the IQA
test must be rescanned.
• Use of PKI- Banks are required to apply digital signatures
teach image of cheque having a unexpired life of 1 month.
• Transmission of data and MICR- The banks will
electronically transmit data to its CHI.
• Service Bureau- If the image capturing is outsourced then
there should be a proper agreement between the bureau
service and the bank.
• Return Processing-