What changed
RBI announced that the paper-based clearing in New Delhi will be replaced by image and data clearing for outward and inward items, with return items processed using data only. Cheque images and data must be archived for eight years at the Clearing House, and banks must retain paper instruments for the same period. RBI noted that most member banks have not yet implemented steps from the July 2004 circular.
What it means for you
Banks must urgently decide where truncation happens (branch, ATM, central location, or hybrid) and how inward payments are processed (centralized, decentralized, or hybrid). Internal manuals need amendments for image-based clearing, and banks should adopt tools like signature verification, fraud detection, and amount recognition. Storage systems for images and data must comply with retention policies and legal requirements.
What you must do
- Finalize the point of truncation for outward cheques and the processing model for inward payments.
- Amend internal banking and clearing manuals to handle image-based clearing and acceptance.
- Evaluate and implement processing tools such as signature verification, fraud detection, and amount recognition.
- Design storage systems for electronic images and data, ensuring online retention as per business needs and offline archival for legal compliance.
- Assess networking infrastructure and system sizing based on cheque volumes and image sizes (approx. 75 KB per image).
Who it affects
All scheduled banks participating in the New Delhi Bankers' Clearing House, IT and operations teams handling cheque processing, Branch and central processing staff involved in clearing
What is the deadline for banks to prepare for the CTS pilot?
The pilot goes live in Q1 2006. Banks must act immediately as most have not yet taken the preparatory steps outlined in the July 2004 circular.
How long must banks retain paper cheques and electronic images?
Paper instruments must be retained for eight years until further instructions. The Clearing House will archive all clearing images and data for eight years.
What tools are recommended for the new system?
RBI recommends using automatic or manual signature verification, fraud detection, account monitoring, Courtesy Amount Recognition (CAR), and Legal Amount Recognition (LAR) tools.