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 LankaPay (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, LankaPay (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 LankaPay (Pvt) Ltd.
Participating Banks have the option to submit the Outward and Outward Return data via LankaPay (LCPL) secured virtual private network during following periods.
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 (CITS), all cheques are transmitted by image. Therefore, submission of difference sizes of cheque are immaterial in the cheque verification process. .
2. 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.
3. What can I do if I misplace a cheque/ representable cheque return notification (CRN)?
Contact your bank immediately and instruct them to stop payment.
4. How long does it take to realize a cheque?
From the time a cheque image reaches LankaPay from banks, it is processed within one business day, so that that cheque could be realized on the next working day.
5. Can I write a cheque in my native language?
In Sri Lanka, cheques written in Sinhala, Tamil and English languages are considered valid.
6. What are the Dos and Don’ts related to cheques?
7. How can I get a certified image of a cheque?
Contact your bank immediately and request for a certified image from LankaPay
8. Is a certified image of a cheque accepted -under court of law?
9. Can a private sector customer draw a check value over Rs.100Mn?
Private sector customer cannot draw a cheque value equal or over Rs.100Mn. An exception has been given only to cheques drawn by Government Departments
10. In what circumstances can a cheque be dishonored/returned?
A cheque can be returned due to multiple reasons. Below are the return codes and the corresponding reasons.
11. How do I issue a cheque to pay someone?
Write the full name of the payee as per payee's bank records on the 'Pay' line. Cross out the 'Bearer' word on the cheque and double cross on the top left corner of the cheque if it has to be paid only to the said payee.
12. Can I present a torn or damaged CRN?
No. You should ask the drawer for a new cheque.
13. What should I do if I have misplaced or lost CRN that can be presented?
CRN is a substitute of the dishonored cheque, you should treat a misplaced or lost CRN as if it were a lost cheque. You should ask the drawer for a new cheque. Also, drawer should also place stop payment instructions for the lost cheque.
14. If a CRN that is presented and returned, will the same CRN be used again?
A new CRN will be issued for each return of the same cheque. Hence, if a CRN is presented and subsequently returned, another CRN will be generated stating new return reason.
Quarterly Statistics (volume) for last 5 Years (as available)