Question 1. What Is Cheque Truncation?
Truncation is the system of preventing the go with the flow of the physical cheque issued by a drawer to the drawee branch. The physical tool can be truncated sooner or later en-course to the drawee branch and an digital photograph of the cheque would be despatched to the drawee branch in conjunction with the relevant statistics just like the MICR fields, date of presentation, supplying banks and so on.
Thus with the implementation of cheque truncation, the need to transport the bodily devices across branches might not be required, besides in fantastic circumstances. This might successfully lessen the time required for price of cheques, the associated value of transit and put off in processing, and so forth., as a result dashing up the manner of collection or realization of the cheques.
Question 2. Why Cheque Truncation In India?
Cheque Truncation hurries up series of cheques and therefore complements customer service, reduces the scope for clearing related frauds, minimizes value of series of cheques, reduces reconciliation problems, removes logistics troubles and so on. With the opposite fundamental product supplying in the shape of RTGS, the Reserve Bank created the functionality to permit inter-bank bills online real time and facilitate company purchaser payments.
The different product, National Electronic Funds Transfer, is an electronic credit switch system. However, to want away cheques is in reality now not feasible and this is the motive why the Bank determined to cognizance on enhancing the efficiency of the Cheque Clearing Cycle. Cheque Truncation is the alternative.
Moreover opposite to perceptions, Cheque Truncation is a more comfy system than the current exchange of physical documents in which the cheque actions from one factor to every other, for this reason, not most effective developing delays however inconvenience to the consumer in case the tool is misplaced in transit or manipulated at some point of the clearing cycle.
In addition to operational efficiency, Cheque Truncation has several benefits to the banks and clients which includes advent of recent products, re-engineering the entire receipts and bills mechanism of the customers, human useful resource explanation, fee effectiveness and so on.
Cheque Truncation hence is an critical efficiency enhancement initiative within the Payments Systems region, undertaken by way of RBI.
Accounts and Finance for Managers Interview Questions
Question 3. How The Uniqueness Of The Cheque Would Be Imparted To The Image?
The snap shots captured at the imparting bank level could be transmitted to the Clearing House and then to the drawee branches with digital signatures of the offering bank. Thus every picture would deliver the digital signature, apart from the physical endorsement of the supplying bank, in a prescribed way.
In order to ensure handiest photographs of requisite first-class reach the drawee branches, there can be a excellent take a look at manner at the extent of the Capture Systems and the Clearing House Interface. This might make certain best pictures of needful exceptional secured with the digital signatures of the offering banks attain the drawee branches. In addition, drawers could consider using holograms, bar coding or such other functions, which could upload to the individuality of the pics.
Question 4. How Rbi Is Proposing To Implement Cheque Truncation?
RBI is proposing to enforce the assignment on a PILOT foundation inside the National Capital Region (NCR), New Delhi. Based at the skilled collected, it might bear in mind extending the insurance to different centres.
In the process of implementation, banks have been given the freedom to decide the factor of truncation. RBI would be putting in an interface with its machine (CHI) at the carrier branches of banks, who are participants of New-Delhi Bankers Clearing House. Banks must decide the factor of truncation and must make sure that the snap shots are digitally signed after their capture.
It would go with the flow thereafter to the interface (CHI) furnished through RBI, from wherein the snap shots would waft to the clearing House with the virtual signatures of the banks. These digitally signed pics could attain the carrier branches of the drawee branches clearing house interface. The carrier branches ought to make sure that these photos are moved across their branches to ensure their processing.
Accounts and Finance for Managers Tutorial
Question five. What Kind Of Services Will Rbi Provide To Facilitate Cheque Truncation?
RBI.S services encompass gadget improvement and set up on the clearing house, interfaces on the banks, stop, network, handholding, attention propagation and schooling.
Business Finance Interview Questions
Question 6. Can You Briefly Explain The Entire Process Flow Envisaged In The Cts?
The CTS task envisages a secure, secured, quicker and powerful device for clearing of the cheques. In the CTS the presenting financial institution will seize the facts & pix of the cheques using their Capture System that's internal to them. They should meet the specifications and requirements prescribed for statistics and pix.
To ensure security, protection and non-repudiation the PKI (Public Key Infrastructure) is being applied across the system. The banks will ship the captured photos and facts to the imperative clearing house for onward transmission to the payee/drawee banks.
For that cause RBI could be presenting the banks software program called the Clearing House Interface (CHI) in an effort to allow them to attach and transmit information in a comfy way and with non-repudiation to the Clearing House (CH). The Clearing House will technique the records and arrive at the agreement determine for the banks and send the specified facts to payee/drawee banks for processing at their give up.
The drawee/payee banks will use the same CHI noted in advance for receiving the statistics and pictures from the Clearing House. It can be the duty of the drawee financial institution Capture System to technique the inward data and pictures and generate the go back record for unpaid contraptions.
Question 7. Who Can Participate In The Cheque Truncation System?
The standards for banks collaborating inside the Cheque truncation machine are:
Membership of the clearing house within the NCR.
Membership of the Indian Financial Network (INFINET)
Bank Management Tutorial Banking Operations Interview Questions
Question eight. How The Non-limitless Member Banks Can Participate In The Cts?
In admire of banks who are not individuals of the INFINITE, the subsequent alternatives are available:
They may turn out to be the sub-individuals of the direct members or
Such banks can also use the infrastructure of the opposite banks having INFINITE membership without being the INFINITE members themselves and their clearing agreement can be executed both at once or through the member via whom they may be taking part.
Question nine. Is The Infrastructure Requirement Same For All The Banks?
The infrastructure required for CTS from banks cease are connectivity from the financial institution gateway to the clearing residence, hardware and software program for the CTS programs. RBI will be supplying member banks with the CHI and the banks have you purchased different hardware and device software program for the CHI and the utility software for his or her seize structures on their personal.
The hardware requirement is based at the quantity of the cheques processed with the aid of the banks. Based at the quantity the CHI is classified into four kinds and the hardware requirement is exceptional for each category.
The band width requirement for every financial institution is calculated based a number of things like the height inward and outward extent of the financial institution, average length of an photograph, efficiency aspect of the community and so on. In addition to that destiny requirement have been taken into consideration for calculating the band with requirement.
Corporate Finance Interview Questions
Question 10. What Are The Image Specifications In The Cts?
Imaging of cheques can be based totally on diverse generation alternatives. The cheque images can be black and white, Grey Scale or coloured. Black and White photos do not screen all the diffused features which are there inside the cheques. Coloured Images increase storage and network bandwidth necessities.
So it was determined that the digital pictures of truncated cheques will be in gray scale generation. There might be three pix of the cheques i.E. The front gray, the front black & white and lower back black & white so that it will be made to be had to member banks.
The image specs are:
Image Type Minimum DPI Format Compression
Front Grayscale a hundred DPI JFIF JPEG
Front Black & White 2 hundred DPI TIFF CCITT G4
Reverse Black & White two hundred DPI TIFF CCITT G4
The picture quality of the Grey Scale photograph will be 8 bits/pixel (256 degrees).
Question eleven. What Is A Gray-scale Image?
Scanners also characteristic like picture-copiers through reflecting the light surpassed via slender passage on to the record. Tiny sensors measure the reflection from every point alongside the strip of light. Reflectance measurements of each dot is referred to as pixel. Images are classified as black and white, grayscale or coloration based totally on hoe the pixels are converted into digital values.
For getting a gray scale image the pixels are mapped onto a number of gray sun shades between black and white. The complete picture of the unique report receives mapped as a few colour of grey, lighter or darker, relying at the color of the supply.
In the case of black and white images, such mapping is made most effective to 2 hues based totally at the variety of values of contrasts. A black and white picture is also referred to as a binary picture.
Private Equity Interview Questions
Question 12. How The Quality Of The Images Will Be Ensured?
As the bills can be made on the basis of the images, it's miles critical to make sure the first-rate of the pics. For that reason the solution proposes Image Quality Audit (IQA) at special stage. RBI may be specifying the photo requirements to the member banks. The presenting bank is needed to carry out the nice audit during the capture itself.
Further excellent audit might be executed on the gateway before onward transmission to clearing residence. Further the drawee bank can ask for the bodily tool if it is not satisfied that the photograph best isn't right enough for payment processing.
Accounts and Finance for Managers Interview Questions
Question 13. How The Image And Data Transmitted Over The Network Is Secured?
The protection, integrity, non-repudiation and authenticity of the information and photo transmitted from the paying financial institution to payee financial institution might be ensured the use of the Public Key Infrastructure (PKI). The CTS is compliant to the requirement of the IT Act, 2000. It has been made mandatory for the supplying financial institution to sign the photo & information from the point of foundation itself. The image and facts are secured the usage of the PKI at some point of the complete cycle overlaying capture machine, the imparting bank, the clearing residence and the drawee bank.
The PKI requirements used are according with the precise Indian acts and practices of IDRBT which is the certifying authority for banks & economic institutions in India.
The requirements described for the PKI are as followed:
Hash algorithm SHA-1
Padding set of rules pkcsnumber one
RSA uneven encryption with 1024 bit key duration
Triple DES (3DES, TDES) symmetric encryption with 168 bit key length
Certificates in x.509v3 format
Question 14. What Type Of Cheques Can Be Presented In The Cts?
All the neighborhood cheques can be presented within the CTS. Banks may gift cheques on banks situated outdoor the NCR, however such banks have branches within the NCR vicinity. The CTS additionally helps the intercity clearing and specialised clearing like excessive price clearing etc. The on-us contraptions where both providing and drawee banks are same are not allowed within the CTS. Images of such units could be stopped on the Clearing House Interface itself.
Question 15. What Are The Precautions Required To Be Taken By The Bank Customers To Avoid Frauds?
Bank clients ought to use photo pleasant cheques. They must ideally use darkish coloured ink even as drawing the gadgets. Care need to be exercised inside the use of rubber stamp, so that it'd now not intervene with the fabric portions of the cheque. The date of the cheque, payee's call, amount and signature are the primary features which might be critical in a cheque.
The use of rubber stamps, and so on, need to not overshadow the clear appearance of these fundamental features in photo. In order to make sure that each one crucial elements of a cheque are captured in an image throughout the scanning procedure, bank clients ought to workout suitable care on this regard.
RTGS Interview Questions
Question 16. Will There Be Any Change In The Process For The Customers?
There could be no trade in the clearing system. Customers might keep to use cheques as at gift, except inside the use of photo pleasant colored ink for making the devices. Of direction, such of these clients, who used to acquire the paid instruments, like Government Departments, could simplest acquire cheque photos in place of the physical contraptions.
This may even facilitate in better processing at their stop, as they may be able to get entry to online snap shots further to the records. As the pictures are going to be moved throughout, the time taken for the receipt of paid devices at their end may be decreased so that higher and well timed manipulate might be exercised over payments. This may even provide an early possibility to the drawers or issuers of cheques to locate frauds or alterations of their cheques.
It is also feasible for cheque issuers to consider newer techniques consisting of embedded verifiable functions such as bar-codes or logos or watermarks, encrypted codes, holograms, and many others., which would facilitate early interception of altered/forged instruments.
Question 17. What Would Be Benefit Of Cheque Truncation To Customers Of Banks?
Before we solution this query, we have to recognize the prevailing system of cheque clearance. The cheques presented through customers, nowadays, are sent to the clearing house on the drawee centres through the beneficiaries, bank. The cheques at the bigger cities, in view of the huge quantity of paper units, are subjected encoding and then to mechanical sorting and thereafter attain the drawee branches.
As in line with the prevailing banking exercise, these devices received at the counters of the drawee branches are paid or returned with the aid of them. The back instruments are surpassed on to the providing customers through the manner of a return clearing. Only after the go back clearing process receives over, banks release the credit score to the customers.
The beneficiary, account gets credited at the equal day on which the drawee, account gets debited; however, the beneficiary is permitted to use the proceeds most effective after the go back clearing technique.
With the introduction of the imaging and truncation, the bodily motion of units could be stopped and the electronic motion of pix of cheques could speed up the manner of settlements and in the long run alter the clearing cycles. The clearing cycle can be shortened and it'd be possible for customers to recognize the proceeds of cheques early.
Thus cheque truncation would lessen effectively the time of float, i.E. Time from the factor of trouble of cheque to the point of time the actual debit takes area. In case such clearing is added throughout the cities, it would make certain the belief of inter-metropolis gadgets faster accordingly making sure early availability of budget to beneficiaries.
Thus the advantages could be summarized as:
Faster clearing cycle;
Better reconciliation/verification technique
Better Customer Service. Enhanced Customer Window
T + zero for Local Clearing and T + 1 for inter-city clearing.
Elimination of Float. Incentive to shift to Credit Push payments.
The jurisdiction of Clearing House can be extended to the complete u . S . A .
No Geographical Dependence
Operational Efficiency will benefit the lowest traces of banks. Local Clearing hobby is a excessive fee no revenue hobby.
Minimizes Transaction Costs.
Reduces operational hazard by securing the transmission direction.
Question 18. What Is An Ird?
Under CTS, after the seize of the image, the physical cheque would be warehoused with the supplying financial institution. In case the beneficiary or another linked persons require the instrument, the payee financial institution could trouble a copy of the photograph, underneath its authentication, which is called Image Replacement record. It is a legally identified alternative of the authentic cheque for re-presentment. The provisions of NI act (Section 81(3) of the NI Act as amended) also permit the usage of such IRD.
Business Finance Interview Questions
Question 19. If The Customer Wants To See The Paper Cheques For Any Reason, What Are The Options Available To The Customer?
The physical devices are required to be stored for a statutory length. It might be obligatory for supplying bank to warehouse the bodily devices for that statutory length. In case a purchaser wants to get a paper tool returned, the device can be sourced from the presenting financial institution thru the drawee financial institution.