Blockchain-Based Digital Cheque Clearance and Verification System

Abstract

This research work possesses detailed functioning of cheque truncations. Cheque is a financial document issued by an individual bank to its customers for the purpose of a transaction from one person to another as well as self-transaction. This is also known as CTS (Cheque truncation system). The proposed system is based on blockchain where all banks are starting to adapt its contents for various purposes on day-to-day usage for its customers. This proposed cheque-clearing system includes more secure as well as sophisticated facilities in it. The cheques do deposit physically but can get cleared and verified digitally. Our proposed system is highly scalable because it’s used algorithms and techniques. On average, cheques get approximately a day or 3 to get clear, to evaluate this time consumption it is a fast and secure solution on to this problem which is time-saving. This research work focuses on the detailed functioning of cheque truncation and the adoption of blockchain technology in the Indian banking system for cheque clearing and various other applications. Cheque truncation is the process of eliminating physical movement of cheques in the clearing process. Traditionally, the physical cheques are exchanged between banks, leading to delays and security risks. With the introduction of the Cheque Truncation System (CTS), cheques are processed digitally, reducing the clearing time and enhancing efficiency. The proposed cheque-clearing system leverages blockchain technology, specifically the SHA-256 algorithm, to provide a more secure and sophisticated solution. SHA-256 is a cryptographic hashing algorithm that generates a unique hash value for each transaction or data element. It ensures the integrity and immutability of the data stored on the blockchain. The adoption of blockchain in cheque clearing brings several benefits to the Indian banking system. Firstly, it enables faster and more efficient clearing of cheques. Instead of the traditional T+1 clearing time, where T is the day of submission, the blockchain-based system significantly reduces the clearing time, potentially processing transactions within minutes. Moreover, the blockchain-based cheque clearing system offers enhanced security. The use of SHA-256 algorithm ensures that the transaction data is tamper-proof and cannot be altered once recorded on the blockchain. This protects against fraudulent activities and enhances trust among stakeholders. Beyond cheque clearing, blockchain technology has various other applications in the Indian banking system. It can be utilized for secure and transparent record-keeping of customer transactions, simplifying Know Your Customer (KYC) processes, streamlining international remittances, enabling smart contract-based agreements, and improving the overall efficiency and transparency of banking operations. The scalability of the proposed system is a significant advantage. Blockchain technology is designed to handle a high volume of transactions and can be scaled horizontally by adding more nodes to the network. This ensures that the system can accommodate the increasing number of cheques and transactions efficiently. By leveraging blockchain technology, the proposed system offers a fast, secure, and scalable solution to the existing challenges in cheque clearing. It enables digital verification and clearance of cheques, reduces the clearing time significantly, enhances security, and opens up opportunities for broader adoption of blockchain in the Indian banking sector.