Why do checks clear so fast

In CTS, banks use scanned copies of cheques for settlement instead of the physical copy making the clearing process partially electronic. Mumbai: Clearing of bank cheques is set to become faster.

In CTS, banks use scanned copies of cheques for settlement instead of the physical copy. It makes the cheque clearing process partially electronic. The CTS makes clearing cycle shorter. The verification and reconciliation process is also superior to the physical settlement of cheques.

RBI started implementing the CTS as entirely phasing out the cheque system is not possible despite digital transactions picking up. For all practical purpose, the cheque clearing between scheduled commercial banks now happens within three working days," said an official of Indian Bank on anonymity as he is not authorised to talk to media.

In the CTS, the image of the cheque is captured at the presenting bank level. It is then transmitted first to the clearing house and then to the drawee branches. Each image carries digital signature from the presenting bank, and there are multiple checks for authenticity of the image captured. Governments have taken this initiative seriously. The United Kingdom passed legislation cutting the time of check clearing to two days by using photographs of checks and sending images electronically, according to a Telegraph article.

Check clearing in the Philippines will be reduced to one day beginning in January , its central bank stated in July. For people living paycheck to paycheck, waiting for funds to be available can have severe consequences. Banks offer overdraft protection , which depends on their credit worthiness, but that could incur interest and additional costs if not balanced appropriately.

Banks, usually known for their archaic technology , are starting to make it easier with smartphone apps that snap pictures of and then deposits checks. You can even do it from an ATM. The Faster Payments Task Force expects to release a two-part report about the proposals next year.

The second portion, planned for mid, will detail the proposals and offer strategies to develop these ideas.

Alessandra Malito is a retirement reporter based in New York. Why it still takes so long for checks to clear — and what you can do about it Published: Oct. Bank checking accounts have gone digital. Your paper checks are going the way of…well, paper! Planes stranded on both coasts could not deliver physical paper checks across the country, thus slowing payments and tying-up cash flow.

The law — Check 21 — allows the recipient of the original paper check to create a digital version — or substitute check — which means the physical check is no longer needed. This allows funds to be transferred more quickly. Very quickly. Funds will leave your account faster than they come in.