truncating and transmitting the message. A bank or clearinghouse receiving a transmitted
electronic image of a truncated cheque shall verify from the transmitting party that the
image is exactly the same.
Risks in Cheque Truncation
• The introduction of the truncation process will change the roles and the responsibilities
of the various participants in the truncation process and may lead to introduction of
certain risks that will have to be mitigated. These are documented below:
o At the presenting bank level, the responsibility to verify the genuineness of the cheque
based on the apparent tenor or the visible features of the cheque presented for collection
may lead to banks refusing to accepting a genuine cheque or accepting a forged cheque
based on a manual scrutiny. Images and MICR data to be sent to the clearinghouse have
to be matched before they are released to the Clearinghouse.
o The Clearinghouse will have to assume that the data given by the banks is the data
meant for that day’s clearing and will have to arrive at the settlement based on this
assumption. If the MICR data given by the bank is not that matching with the day’s image
the bank has sent for collection, it may lead to erroneous settlement and large returns.
• Truncating cheques entails additional operational risks. Banks will have to take adequate
measures to ensure that all necessary safeguards are provided for – in consonance with
legal requirements and banking practice while making payments, especially for high value
• The drawee bank has to verify the signature on the image of a cheque. If a drawee bank
chooses to verify signatures on the images of cheques above a cutoff amount only, then it
runs the risk of paying some forged instruments.
• The collecting bank under a truncated environment has to verify the genuineness of the
cheque based on visible features.
• It is being suggested that the clearinghouse cannot be held responsible for fraud,
forgery etc. As per the recommendations of th