Examkin

Question

Difficulty: MediumElectronic Banking Services and Payment Systems

To shorten the clearing cycle of interbank paper cheques from several business days to a single day, modern commercial banks capture and transmit digitized electronic images of cheques to clearing houses instead of physically moving the paper documents between bank branches. Which electronic banking process describes this system?

  1. Cheque Truncation System (CTS)Answer
  2. B
    Real-Time Gross Settlement (RTGS)
  3. C
    National Electronic Funds Transfer (NEFT)
  4. D
    Point of Sale (POS) Clearing

Answer

Cheque Truncation System (CTS)
The term 'truncation' in commercial banking refers to stopping the physical movement of paper cheques. The Cheque Truncation System (CTS) converts physical cheques into digital images and electronic MICR data for transmission to the clearing house, drastically reducing clearing turn-around time.

Step-by-Step Solution

1
Analyze the scenario described in the question.
The bank digitizes paper cheques into electronic images to avoid physical transportation and speed up clearing.
Understanding the key mechanism (digitizing paper cheques to stop physical movement) identifies the specific e-banking channel.
2
Match the mechanism with the correct electronic banking term.
Truncation refers specifically to stopping the physical flow of paper documents, making Cheque Truncation System (CTS) the correct answer.
CTS is designed specifically for paper cheque digitization and accelerated interbank clearing.

Key Concept

Cheque Truncation System (CTS)
Estimated Time:1m 0s
Rate this question

Topics

Electronic Banking Services and Payment Systems

More questions from this topic