June 7th, 2013 by CHEQUEMAN
Shared Services
There is no necessity for all banks to make huge investment in the technology and hardware procurement. Infrastructure can be shared either between banks or through independent service providers.
Banks like State Bank of India and Punjab National Bank have already invested a lot in the resources and technology required for Cheque Truncation. Hence, the other Banks can form a consortium with them by which they can avail services like:-
- Imaging of Cheques which can be sent by the service branch of one Bank to the Image Processing Center of either SBI or PNB.
- Transmitting images to clearing house where the other Banks would be utilizing the networking capabilities of these two Banks.
- After clearing, these images can be returned to the service branches of the respective banks’ in diskettes or CD.
- One of these two Banks can act as a Centralized Warehouse in a certain region to store the cheque images for the other Banks.
All these services and more can be provided by them for a charge as negotiated between them and the other Banks.
Bandwidth
Depending on the maximum cheque data and the image volumes to be transmitted, the bandwidth has to be calculated. The images do not take much of the Bandwidth but, the network may get congested if a lot of packets are sent at the same time. Hence network management is an extremely important issue to look at.
If images are sent batch wise then it may create bandwidth problem depending on the transmitting capacity of the Leased Line or the dial-up. A minimum of 2 Mbps (or more) line will be required to overcome congestion in the network. But, the thing to notice is that this connection would just be used once a day during batch upload and other than that the capacity will just go waste. The Banks can go in for this option provided they can effectively utilize the bandwidth available during lean hours.
A wiser option would be to go for an independent 64 kbps (or more) leased line between the service branch and the MICR Center to continuously send the data and image as and when they are scanned and the required details fed. This option would effectively utilize the bandwidth available during the working hours plus it would be easy on the pocket.
Cheque Imaging
Instead of the JPEG and GIF format for storing images as was originally thought, another option for the service branch of the presenting bank could be to save the scanned cheque images in the TIFF format and then FTP them to the Clearing House. This is because, images in TIFF format occupies very less space. As the images go from Clearing House to the Paying Bank the TIFF files can be reconverted into gray scale enhanced JPEG images.
Grey Scale vs. Black & White Scanning
The Working group on cheque truncation has suggested grey scale scanning for the images. The clarity would definitely be better in case of grey scale but the option of black & white scanning should also be pondered upon as it would save cost due to Lower storage space requirement and bandwidth consumption. Therefore, for cheques below a certain amount, the usage of black and white scanning can be looked into by the Banks.
Storage
RBI has suggested that there should be a single agency or a bank which can look after the storing of the cheque images. Apart from that, the respective banks should also preserve the cheque images and store them in their service branch. These digital images can be sorted and also indexed by account number, cheque number, date, customer name or any other business criteria for their easy retrieval, if the need arises.
June 4th, 2013 by CHEQUEMAN
When to capture the Cheque Image
The image of the cheque should only be captured after it is encoded. If the image is captured before encoding the cheque amount on the physical cheque and then some validation tool is used to print the cheque amount on the image, there lies an error. The chances are that, due to human error the amount of the cheque and the amount entered by the tool may be different.
Another issue is that, if first the cheque is encoded and then the image is captured, the relationship between the images and the MICR data of the instruments is of utmost importance. This uniqueness must be maintained not only across a bank or an Image processing center but also across different banks and MICR centers. This is because if the MICR data is linked with a different image the entire cheque truncation process will come to a standstill.
The solution to this problem is to convert the Images into the ASCII code and then club it with the MICR data, which is also sent to the clearing house in the ASCII format. On the receiving side these ASCII code can be reconverted back to the image and would thus correspond to the right MICR data.
Truncation Model to be adopted
The Presentation Bank has the option of truncating the cheque at the branch or the service branch or even outsourcing the process. The Bank can thus adopt three models for its Cheque Truncation needs:-
Centralized Image Processing
The Banks having a Core Banking Solution can go in for a centralized cheque processing center where Cheques from various locations can be collected at a central location for imaging. The images can then be sent to the MICR center.
This model has an advantage that all debits and credits to the accounts can be done from a central place, thereby reducing the burden on individual branches.
Decentralized Image Processing
The other option can be to provide the imaging facilities at each branch of the Bank, such that the cheques are truncated and scanned and the MICR data with the image are collectively sent from the individual Branch to the Service Branch.
Hybrid
Another option can be to select some nodal branches in the city which can collect the cheques, truncate and scan them, and then send the collective MICR data and images to service branch.
The Choice of the model, out of these three, will be based on the customer service to be provided, resources in terms of technology readiness, networking facilities and the investment/cost factor.
May 31st, 2013 by CHEQUEMAN
The RBI set up a working group on Cheque Truncation and e-cheques, which studied the Truncation and Imaging processes of other countries and came out with the following recommendations:-
- In India the cheques should be truncated at the presenting bank itself and there should not be any amount based restriction.
- An electronic image based model will be the mode of truncation.
- The storage requirement of the electronic image of physical cheques is necessary and the preservation period should be eight years.
- Truncation and standardization of cheque format are seen as independent initiatives with the latter being implemented even after the introduction of cheque truncation. Therefore, currently the settlement should be on the basis of the current structure of the MICR fields.
- Public key infrastructure (PKI) to be adopted to protect data and image flow over the network. Digital signatures should be used to establish authenticity, non-repudiation and integrity
- The security requirements for the storage of images by the banks or the centralized warehousing agency should be in consonance with the requirements of the IT Act 2000.
- From the point of view of efficiency and control, RBI is planning to set up a centralized clearing system and a central warehouse in Delhiwhere a single agency or individual drawee bank can act as the points of storage.
Keeping all these points in minds, RBI has already floated a RFP to various vendors to provide it with an all-inclusive technology for cheque truncation. It has plans of starting the Project in the National Capital Region by July 2005 and then rolling it out to other metros. The overall aim being to eliminate physical transfer of cheques in the peak centers in the next two years time.