CHEQUE TRUNCATION – Business Opportunities K.S. Bajwa, General Manager –IT Punjab National Bank
Agenda • Working group on Cheque Truncation and E - cheques • Cheque Truncation – Concept, Benefits, Point of Truncation • Business Process Re-engineering • Legal Issues involved • Image Service Bureaus – Business benefits.
Working Group on Cheque Truncation and E-cheques • Physical cheque will be truncated with in the Presenting Bank • Point of truncation will be decided by each individual member Bank • Settlement will be generated on the basis of current MICR code line data Contd….
Working Group on Cheque Truncation and E-Cheques • Grey scale Technology will be deployed for imaging • Images will be preserved for 8 years • A Centralised agency per clearing location will act as an image warehouse for the Banks • Public key infrastructure will be deployed to protect image and data flow over the Network
Cheque Truncation System - Concept • Movement of the physical instrument is curtailed • Image of the payment instrument is captured along with MICR data simultaneously • Clearing Process completed based on Electronic data and image of the Cheques
Benefits of the CTS • Facilitate Banks to increase productivity and avail all the benefits of smarter technology of Electronic Cheque Presentment • Better Operational efficiency • Faster clearing cycle of payment instruments • Cost saving in terms of storage and transport cost • Optimal Customer satisfaction
Improved handling of post-dated cheques deposited by the customer, as the images can be scanned and stored and the system can automatically process the scanned images on the due date. Improved business intelligence systems can be put in place. Business Opportunities - Banks
Introduction of new payment system products like e-cheques Better funds management Reduction in Transaction cost Better management of space and manpower Improved regulatory compliance. Improved Management Information Systems which will facilitate better decision making. Business Opportunities - Banks
Faster realisation of Funds Better funds management Can avoid visit to the Branch as more outlets will be available for depositing cheques for clearing, at convenient locations. Business Opportunities - Customer
Upgrade of Technology opens up new business opportunities for vendors and solution providers. Can improve the Brand image of their products by providing improved functionalities for image capture, storage and retrieval Scope for improvement in processing capabilities , especially scanners and servers Business Opportunities -Vendors
Originating Branch ATM / Customer Location An identified Branch for a Cluster of Branches Service Bureau Service Branch of Originating Bank Point of Truncation
Infrastructure required Capital Cost for set up Recurring Costs Distance of the Originating branches from the point of truncation Technology used Volume of Cheques / images that will be processed Facilities available for storing the cheques & images and their retrival Factors to decide point of Truncation
PC with printer Scanner Network The configuration of scanner will depend on the volume of Cheques ( Documents per minute) - Approximate capacity – 30 documents per minute (dpm) Infrastructure Required- Point of Truncation
Capacity of scanner - Documents per minute Storage of Images – ( Size of 3 prescribed images along with Digital Signature – 75 KB ) Front Gray Scale, Front Black & White and Reverse Black and White Truncation
Business Process Reengineering • System and Procedures are to be re-looked to enable the Banks to work in electronic cheque processing environment • Necessary guidelines to be issued to the Branches to enable them to pass the cheque based on images instead of physical cheques • Process of return of cheques and it’s intimation is to be devised. • Responsibility of genuineness of the image of the cheque is to be fixed since the drawee Bank will receive only the image of the cheque and not the physical cheque Contd..
As per amended NI Act, 1881 the Presenting Bank will ensure Prima –facie security of various mandatory fields of the cheque like date, availability of signature and chemical/material alteration Storage of physical cheque – As per amended NI Act, drawee Bank can requisite for physical cheques in case of need. System will require storage of cheque as per “Banking Companies preservation of Records Rules, 1985”. Point of storage of physical cheques is to be decided Business Process Reengineering
Legal Issues involved • Amendments made in Negotiable Instrument Act, Information Technology Act • Onus of verifying the Genuineness of the Cheque will shift to the stage at which it is presented • KYC norms are to be meticulously complied by the Banks, as circulated by RBI Contd ..
Legal Issues involved • Drawee Bank will continue to verify the signature and availability of funds • Drawee Bank will have the right to seek further information on the veracity/ genuineness of the cheque • Drawee Bank can also seek the physical instrument for verification
Smaller banks will not have sufficient volume of cheques to justify capital investment Sufficient infrastructure may not be available in the branch or service centre Operational costs for maintaining the system may be relatively high if sufficient capacity utilisation is not there. Why Image Bureaus
Provide image capture, storage and retrieval facilities to a group of Banks for a fee. High end systems are set up for faster image capture, transmission, storage and retrieval . Adequate infrastructure put in place to manage the Bureau. Image Service Bureaus
Source of Revenue Economy of Scale Improved Technology can be used as High end systems can be put in place. Business Benefits for set up of Image Service Bureaus