Abstract
Clearing has been an important part of the banking system and will always remain a part of it for years to come. Clearing in banking indicates the transfer of fund from one person to another. This clearing of fund can take place in 2 ways either through cash or through cheque. There has been no major change in the cash transactions except for the changes in value of money. However the cheque clearing system has undergone lot of changes. The origin of cheque can be traced back to the first century AD, where banks in and around Persia used to issue letters of credit called “Sakks” wherein the banks used to pay the identified payees as per the instructions. This eliminated the cumbersome process of carrying money or gold which was very risky. Changes have taken place in cheque clearing over the period of time. From ordinary cheque clearing to MICR clearing and finally to the latest in clearing ‘Cheque Truncation System’. This is a conceptual paper which tries to explore the changes that have taken place in the bank clearing system in the past and speaks about the present system of cheque clearing the Cheque Truncation System.
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