RBI plans clearing house for cheque truncation

The Reserve Bank of India (RBI) is planning to set up a centralised clearing facility and a central warehouse in Delhi prior to the introduction of cheque truncation system in the National Capital Region in July 2005.

The central bank has received bids from seven IT companies which include software solution providers such as IBM, NCR, TCS and Infosys, said Reserve Bank of India chief general manager, R Gandhi on the sidelines of a conference . The RBI is currently evaluating the vendor bids, he added.

Cheque truncation system (CTS) is an image-based cheque clearing system. With CTS, the cheque will be scanned upon deposit and its electronic image (instead of the physical cheque itself) will be transmitted throughout the entire clearing cycle.

Eighty-one member banks will participate in the pilot cheque truncation project. State Bank of India (SBI) and Punjab National Bank (PNB) are the two major banks to participate in this pilot.

PNB has introduced cheque truncation in 10 stations, said Punjab National Bank, general manager information technology K S Bajwa. We are also planning to set up an image archive for the RBI in Delhi, said Bajwa.

The archive will store the images which can be referred to in case of any dispute. Other bank could access the archive for a particular price, he added.

The introduction of CTC will ensure smooth transaction at a relatively low cost. However, certain issues needs to addressed, to send images, banks will need bandwidth which is expensive and not available at many places, Bajwa said.

In addition to this the regulator will have to address the question of as to who will take the responsibility to ensure that the instrument is genuine the issuer or the payee, he added.

Speaking on RBI's other technology initiatives, Gandhi said RBI is constantly working with IIT Mumbai, IIT Chennai and other research houses on various projects to ensure that the banking industry is benefited with technology at a low cost. This has been the endeavour of the RBI in the recent times.