RBI Proposes Same-Day Cheque Clearance: What This Means for Customers

In the near future, deposited cheques will be cleared on the same day.

Currently, cheques are processed in batches at specific times, which can extend the settlement period to two working days (T+2). This results in a longer wait and higher risk for both the depositors and the banks.

What This Means for Customers

Right now, cheque clearing is handled through the Cheque Truncation System (CTS), which processes cheques in batches and can take up to two working days to complete.

To boost efficiency and cut down on settlement risks, the Reserve Bank of India (RBI) has proposed shifting from batch processing to a continuous clearing system.

“With the new continuous clearing approach, cheques will be scanned, processed, and cleared throughout the business day, resulting in much faster clearance times of just a few hours,” explains Adhil Shetty, CEO of Bankbazaar.com.

Although the use of cheques has diminished with the rise of UPI (Unified Payments Interface), NEFT (National Electronic Funds Transfer), and RTGS (Real Time Gross Settlement), they are still a crucial payment method. The reduction in clearing time will significantly improve the customer experience and lower the risks linked to delays in settlement.

 What is the Cheque Truncation System?

The Cheque Truncation System (CTS) is an electronic cheque clearing process managed by the Reserve Bank of India (RBI). As the term "truncation" implies, this system eliminates the physical movement of cheques by replacing them with digital images.

Instead of transferring the actual cheques between branches, an electronic image of the cheque is created and transmitted, along with essential data. This method eliminates the costs associated with transporting physical cheques, speeds up the collection process, and streamlines cheque processing.

CTS was initially launched as a pilot project in the National Capital Region (NCR) in February 2008, marking a significant step towards modernizing cheque clearing in India.

 Benefits to Account Holders

With the Cheque Truncation System (CTS), the need for physical movement of cheques is eliminated, reducing the risk of lost cheques during transit. CTS also speeds up the clearance process, meaning cheques can be processed and credited to your account much faster. Depending on whether the cheque is local or outstation, it could potentially clear on the same day, as proposed by the RBI governor.

One of the most significant benefits is the enhanced security of CTS-compliant cheques. They are designed to be more secure and less susceptible to fraud, providing greater peace of mind for account holders.