Banks to clear cheques within few hours from October 4; here's what RBI's new rules say

The Reserve Bank of India (RBI) on Wednesday announced that the Cheque Truncation System (CTS) will shift from the current batch-based method to a continuous clearing and settlement-on-realisation model in two phases.

Under the new mechanism, the banks will start clearing cheques within a few hours instead of the current system of next-day settlement, with the new system kicking in from October 4.

Cheques will be scanned, presented, and passed in a few hours and on a continuous basis during business hours.

The decision follows the announcement made in its Statement on Developmental and Regulatory Policies on August 8, 2024.

“All banks are advised to make their customers adequately aware of the changes in the cheque clearing process,” the circular stated.

How the new system will work

There will be a single daily presentation session from 10:00 pm to 4:00 pm.

Banks will be required to scan cheques received at branches and send them to the clearing house on a continuous basis during this window. The clearing house will release cheque images to the drawee (paying) banks in real time.

Drawee banks will process cheques continuously from 10:00 pm to 7:00 pm, generating either positive confirmation (for honoured cheques) or negative confirmation (for dishonoured ones).

In Phase 1 (October 4, 2025, to January 2, 2026), the expiry time will be fixed at 7:00 pm. Any cheque not confirmed by that time will be treated as approved and included for settlement.

Phase two of the transition will begin on January 3, 2026, when banks will have to process and confirm cheques within three hours of receipt.

For example, a cheque received between 10:00 and 11:00 am must be confirmed by 2:00 pm.

Cheques for which confirmation is not provided by the drawee bank in the prescribed 3 hours shall be treated as deemed approved and included for settlement at 2:00 pm.

Settlement and customer impact

Unlike the current batch settlement, there will be no accounting entry at the time of cheque presentation. Settlements will occur every hour from 11:00 AM to 7:00 PM based on positive confirmations and deemed approvals. Cheques with negative confirmations will be excluded from settlement.

Once each hourly settlement is completed, the clearing house will notify the presenting bank, which must release funds to the customer immediately, but no later than one hour after settlement, subject to standard safeguards.

RBI directed banks to make their customers adequately aware of the changes in the cheque clearing process.

Banks have also been asked to be in readiness to participate in continuous clearing in CTS on the prescribed dates.