Cheque truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point by the presenting bank en route to the drawee bank branch. An electronic image of the cheque is sent to the drawee branch along with the relevant information like the presenting date, presenting banks, MICR etc. This would eliminate the need to move the physical instruments across branches, resulting in an effective reduction in the time required for payment of cheques, the associated cost of transit and delays in processing
Cheque Image and Truncation System (CITS)
The Payment & Settlement System Act No. 28 of 2005 has laid down the procedure for the payment of cheques electronically presented. Cheque Imaging & Truncation System (CITS) is an image-based cheque clearing system, which replaced the physical cheque with electronic information, flowing throughout the clearing cycle. This process eliminated the actual cheque movement in cheque clearing and reduced the delays associated with the physical movement of cheques. The implementation of CITS is an initiative of LankaClear (Pvt) Ltd in association with the Central Bank of Sri Lanka (CBSL) for faster clearing of cheques.
CITS is designed to accept images and MICR data of physical cheques submitted either on CD-ROMs or by direct electronic transfer. As such, the physical movement of cheques is truncated at the point of image capture and hence, the paying Bank not receive a physical cheque during the entire clearing process.
As a measure of enhancing the security of cheque images during the transmission and improve the efficiencies in the clearing cycle, in September 2017, LankaClear (Pvt) Ltd enabled the all-participating banks to submit the images and MICR data of physical cheques through secured virtual private network. This web based system allows the participating banks to upload large volumes of cheques (in batches) and initiate their clearing almost immediately. It cuts down delay in physical movement of CDs, the risk associated with physical movements and eliminated the use of courier service involvement in CITS clearing operation. Further, this system provide security, integrity, non-repudiation and authenticity of the images and MICR data transmitted from the presenting bank to the paying bank through LankaClear (Pvt) Ltd.
Participating Banks have the option to submit the Outward and Outward Return data via LankaClear (LCPL) secured virtual private network during following periods.
|Clearing Leg||Window Open||Window Close||Activity||From||To|
|Outward Return||10:00 a.m.||11:30 a.m.||Send Outward Return data via VPN of LCPL||Paying Banks||LCPL|
|Inward Return||01:15 p.m.||Next business day 09.30 a.m.||Release Inward Return data and Reports via VPN of LCPL||LCPL||Collecting Bank|
|Outward||10:00 a.m.||07:30 p.m.||Send Outward images and data via VPN of LCPL||Collecting Bank||LCPL|
|Inward||12.00 a.m.||Next business day 09.30 a.m.||Release Inward images, data and Reports via VPN of LCPL||LCPL||Paying Bank|
|Outward Return||10:00 a.m.||11:30 a.m.||Send Outward Return data to LCPL counter via CD||Paying Banks||LCPL|
|Inward Return||01:30 p.m.||Next business day 09.30 a.m.||Release Inward Return data and Reports from LCPL counter via CD||LCPL||Collecting Bank|
|Outward||10:00 a.m.||07:30 p.m.||Send Outward images and data to LCPL counter via CD||Collecting Bank||LCPL|
|Inward||12.00 a.m.||Next business day 09.30 a.m.||Release Inward images, data and Reports from LCP via CD||LCPL||Paying Bank|
1. Faster clearing cycle
Prior to the launch of the CITS ,banks cleared cheques through at least seven clearing systems such as Colombo clearing, Outstation clearing, local clearing etc., and the clearing cycle ranged from 2 to 7 business days. CITS operates on an Island wide singular system which functions on a T+1 basis. Prior to CITS, banks managed their risk during periods of uncertainty, by placing a hold on the funds. The period, during which the funds were kept on hold for various periods, were based on the estimates of banks. With cheque imaging and faster processing times, banks shall be able to reduce “hold periods”.
2. Reduced risk
Civil unrest, floods and other major incidents can disrupt the cheque clearing processes and affect the smooth operations of banks. More common occurrences such as courier delays due to weather conditions can also affect clearing performance. In contrast an exchange based on electronic transmissions can be completed within minutes.
3. Faster cheque tracing and statement re-creation
With imaging, all cheques will be imaged and stored in an electronic archive. An authorized staff member will be able to perform searches from their branch terminal and immediately print a hard copy showing both the front and the rear of the cheque. Statement re-creation will be speedier as well.
4. A variety of ways to access electronic cheque images
Banks will have the option of offering flexible, personalized customer access to cheque images. Electronic access to images will allow businesses to reduce the storage facilities needed for returned paper cheques and conduct in-house research on their own cheque image archive. Both business and personal banking customers who have access to on-line banking shall have the option of viewing cheque images online, shortly after the transaction is reflected in their account. More timely account reconciliation will contribute to earlier detection of fraudulent items, and in turn, a greater chance of preventing fraud.
5. Potential new products and services to combat fraud
Cheque imaging shall enable banks to offer new products and services to combat signature forgery and cheque alteration. (Altering fields to show a value, payee’s name and/or date not originally authorized by the drawer of the cheque)
6. Efficient and streamlined workflow when using Images
Banks can process image items concurrently instead of serial processing of physical cheques, which enables to manage work force efficiently.
7. Extended banking hours
With the improved efficiencies in clearing cycle, Banks can accept cheques over the counter up to a later time to submit cheques for clearing, and thereby increase the service level to the end customers.
8. Image retrieval
Participating banks can respond to enquiries on the cheques quickly as images can be easily retrieved, increasing the service level to the end customers.
9. Eliminate courier costs
Electronic transformation of cheque images and MICR data eliminates the additional spending on courier activities
1. Why is there a single size for personal and corporate cheques within CITS?
With the implementation of the Cheque Imaging and Truncation System, all cheques are transmitted by image, rendering the difference in size of cheque in material in the cheque verification process.
2. Why do you then call it ?
Collecting banks are no longer required to physically send cheques to the National Clearing House (LankaClear). Physical Cheques are retained by the presenting bank and data and images are transmitted electronically to the paying bank via LankaClear
3. What are the main changes in the CITS cheque?
New standard size for both personal and corporate cheques (Refer to Image Friendly Cheque specification) Introduction of a Cheque Return Notification (CRN)
4. How does CITS affect me? What changes do I need to take note of with regard to cheque writing, deposits?
You are required to use an Image Friendly Cheque and to write with a dark colored ink (blue or black ink is recommended) to ensure that the image of the cheques can be captured.
There is no change to the process with regard to availability of funds and the way customers conduct cheque deposits as the traditional form of cheque clearing will not be replaced.
5. Can the new cheques be written in Sinhala characters?
6. Can I use rubber stamps for "account payee"?
To ensure that all elements of the cheque are captured during the scanning process do not place stamps across the face of the cheque as the Payee, Cheque Amount and Signature must be fully legible on the image as well.
7. Can I use rubber stamps for the "date" columns?
Yes, as long as it does not interfere with the lines in the box.
8. But what's in it for me? What are the benefits to me as a customer?
The CITS System provides seamless integration to existing Banking technology to enable instant retrieval of clearing information and the seamlessness provides a more secure and efficient way to process cheques.
The greatest benefit to the customer is that the funds are credited the following day, irrespective of the location of the Bank branch the cheque was deposited.
9. How will overseas / foreign cheques be treated?
There will be no changes to the clearing process if the cheques are issued in US Dollars as they will be cleared on manual clearing basis (same as current practice).
10. Can a customer alter a cheque?
To protect the interest of the accountholder and to mitigate against fraud, alteration is not allowed and such cheque will be rejected.
11. What is Cheque Return Notification (CRN) mean?
CRN shall mean the Cheque Image Return document defined in the Section 34 (1) and (2) of the Part III of the Payment and Settlement Systems Act No. 28 of 2005.
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