This article provides a short note on cheque truncation.
Cheque truncation is the process of stopping the flow of the physical cheques issued by a drawer to the drawee branch. The physical instrument will be truncated at same point en-route to the drawee branch and an electronic image of the cheque would be sent to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting Bank etc.
Thus with the implementation of cheque truncation, the need to move the physical instruments across branches of different banks would not be required, except in exceptional circumstances. This would effectively reduce the time required for payment of cheques, the associated cost of transit and delay in processing etc. Thus speeding up the process of collection or realization of cheques.
The image captured at the presenting bank level would be transmitted to the clearing house and then to the drawee branches with digital signatures of the presenting bank. Thus each image would carry the digital signatures, apart from the physical endorsement of the presenting bank in a prescribed manner.
In order to ensure only images of requisite quality reach the drawee branches, there will be quality check processes at the level of capturing system and the clearinghouse interface. This would ensure only images of requisite quality secured with the digital signatures of the presenting banks reach the drawee branches. In addition, drawers could consider using holograms, Bar-Coding or such other features, which would add to the uniqueness of the image.