Page 241 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes What are the benefits of CTS to bank customers?

Following are the benefits of Cheque Truncated System:
1. The main feature of the CTS 2010 cheque is that it has accelerated the process of cheque
clearance and settlement between banks which evidently mean quicker clearance, shorter
clearing cycle and quicker credit of the amount to your account.
2. There is no fear of loss of cheques in transit and chances of cheques being lost due to
mishandling, etc. are totally avoided since the movement of cheques from one bank to
another having been stopped.
3. Currently, clearing is limited to banks operating within a city or within a restricted
geographical area. Under the CTS, it is proposed to incorporate multiple clearing locations
managed by different banks in different centres so that cheques drawn on interior banks
can also be cleared electronically.
4. This will eventually result in integration of clearing houses into a nation-wide standard
clearing system, thus making cheque clearance drawn on any bank in India possible
within 24 hours.
5. Under the CTS system, moving of physical cheques at different points is eliminated as
only electronic images are transmitted between banks, and this will substantially reduce
the scope for perpetuation of frauds inherent in paper instruments.

6. It is also possible now to detect frauds easily through interception of altered and forged
instruments while passing through the electronic imaging system because of the
introduction of homogeneity in security features under CTS standards 2010. This is expected
to reduce operational risks and risks associated with paper clearing for the benefit of all
bank customers.
7. In the words of RBI, “CTS brings elegance to the entire activity of cheque processing and
clearing and offers several benefits to banks in terms of cost and time savings, including
human resource rationalization, cost effectiveness, business process re-engineering and
better customer service.”

Self Assessment

Fill in the blanks:
18. CTS was introduced as a pilot project in the National Capital Region in ........................ and
in Chennai from September .........................

19. CTS benefits include ........................ & ........................ savings.
14.10 Mergers and Acquisitions in Banking

Before going further, let us understand the definition and meaning of merger:
“Merger is defined as combination of two or more companies into a single company where one
survives and the others lose their corporate existence.”
The survivor company acquires all the assets as well as liabilities of the merged company or
companies. In India, mergers are called as amalgamations, in legal parlance.

Typically, shareholders of the amalgamating company get shares of the amalgamated company
in exchange for their existing shares in the target company. Merger may involve absorption or
consolidation.

236 LOVELY PROFESSIONAL UNIVERSITY