Role of IT in Banking Department Operations Clearing

Operations clearing
A clearing house is a department that provides clearing and settlement services for financial
and commodities derivatives and securities transactions.
To manage this process they use (CTS) cheque truncation systems Application.
Implementation
The Reserve Bank of ndia first implemented CTS in !ational Capital Region" !e#
$elhi from $ecem%er &'" &((' #ith )( pilot %anks and the dead line #as set as April *("
&((+ for all the %anks. After migration from ,CR (,agnetic ink character recognition) to
CTS (cheque truncation systems) the traditional ,CR %ased cheque processing #as
discontinued.
Process flow envisaged in the CT
Authori-ers logs in to the CTS application #here he.she can see the cheque image along #ith
details like customer signature" account status like account is active or not" it/s current
account or saving" #hether enough fund is availa%le to pass the cheque " customer signature"
0TC. Also CTS scans ) to * thousand cheques at one particular point of time.
The CTS pro1ect envisages a safe" secured" faster and effective system for clearing of the
cheques. n the CTS the presenting %ank #ill capture the data 2 images of the cheques using
their Capture System #hich is internal to them. They have to meet the specifications and
standards prescri%ed for data and images. To ensure security" safety and non3repudiation the
45 (4u%lic 5ey nfrastructure) is %eing implemented across the system. The %anks #ill send
the captured images (cheque no" account no6etc) and data to the central clearing house for
on#ard transmission to the payee7dra#ee %anks. 8or that purpose RB #ill %e providing the
%anks soft#are called the Clearing 9ouse nterface (C9) that #ill ena%le them to connect
and transmit data in a secure #ay and #ith non3repudiation to the Clearing 9ouse (C9). The
Clearing 9ouse #ill process the data and arrive at the settlement figure for the %anks and
send the required data to payee7dra#ee %anks for processing at their end. The dra#ee7payee
%anks #ill use the same C9 mentioned earlier for receiving the data and images from the
Clearing 9ouse. t #ill %e the responsi%ility of the dra#ee %ank Capture System to process
the in#ard data and images and generate the return file for unpaid instruments.
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Role of IT in Banking Department Operations Clearing

Benefit of CT to c!stomers of "anks
The cheques presented %y customers" today" are sent to the clearing house at the dra#ee
centres %y the %eneficiaries. Bank. The cheques at the %igger cities" in vie# of the large
volume of paper instruments" are su%1ected encoding and then to mechanical sorting and
thereafter reach the dra#ee %ranches. As per the e:isting %anking practice" these instruments
received at the counters of the dra#ee %ranches are paid or returned %y them. The returned
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Role of IT in Banking Department Operations Clearing
instruments are passed on to the presenting customers through the process of a return
clearing. ;nly after the return clearing process gets over" %anks release the credit to the
customers. The %eneficiaries. Account gets credited on the same day on #hich the dra#ees.
Account gets de%ited< ho#ever" the %eneficiary is permitted to use the proceeds only after the
return clearing process. =ith the introduction of the imaging and truncation" the physical
movement of instruments #ould %e stopped and the electronic movement of images of
cheques #ould speed up the process of settlements and ultimately alter the clearing cycles.
The clearing cycle could %e shortened and it #ould %e possi%le for customers to reali-e the
proceeds of cheques early. Thus cheque truncation #ould reduce effectively the time of float"
i.e. time from the point of issue of cheque to the point of time the actual de%it takes place. n
case such clearing is introduced across the cities" it #ould ensure the reali-ation of inter3city
instruments faster thus ensuring early availa%ility of funds to %eneficiaries.
Thus the %enefits could %e summari-ed as>
a) 8aster clearing cycle
%) Better reconciliation7verification process
c) Better Customer Service. 0nhanced Customer =indo#
d) T?( for @ocal Clearing and T ? ) for inter3city clearing.
e) 0limination of 8loat. ncentive to shift to Credit 4ush payments.
f) The 1urisdiction of Clearing 9ouse can %e e:tended to the entire country 3 !o
Aeographical $ependence
g) ;perational 0fficiency #ill %enefit the %ottom lines of %anks B @ocal Clearing activity
is a high cost no revenue activity.
h) ,inimi-es Transaction Costs.
i) Reduces operational risk %y securing the transmission route.
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