RBI Policy: RBI proposes same-day cheque clearance. Here's what it means for customers

The RBI Governor Shaktikanta Das proposed to transition CTS from the current approach of batch processing to continuous clearing.

Soon, the cheques you deposit with your bank branches will be cleared the same day.

At present, deposited cheques are collected and processed in groups or batches at specific time slots during the day, leading to a settlement cycle of up to two working days (T+2). This means a longer waiting period and a potentially higher settlement risk for both the participants.

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What it means for customers 

Currently, cheque clearing through Cheque Truncation System (CTS) operates in a batch processing mode and has a clearing cycle of up to two working days.

To improve the efficiency of cheque clearing and reduce settlement risk for participants and to enhance customer experience, the Reserve Bank of India (RBI) governor has proposed to change the CTS method from batch processing to continuous clearing.

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“With the proposed continuous clearing approach, cheques will be scanned, presented, and cleared on a continuous basis throughout business hours, leading to faster clearance cycles of just a few hours,” says Adhil Shetty, CEO of Bankbazaar.com.

While the significance of cheques is coming down in the age of UPI (Unified Payments Interface), NEFT (National Electronic Funds Transfer), and RTGS (Real Time Gross Settlement), they remain an essential payment tool and the reduction in clearing time will enhance customer experience and reduce the risks associated with delayed settlements, he added.

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What is the Cheque Truncation System?

CTS is a cheque clearing system undertaken by the RBI . As the name suggests, truncation is the process of stopping the flow of physical cheques in its way of clearance.

In its place, an electronic image of the cheque is transmitted after capturing key data.

Cheque truncation thus obviates the need to move physical cheques across branches. This effectively eliminated the associated cost of movement of physical cheques, reduced the time required for their collection and brings elegance to the entire activity of cheque processing. CTS was first introduced and implemented in the National Capital Region (NCR) in February 2008 on a pilot basis.

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Benefits to account holders

Since there is no physical movement of cheques, there is no fear of loss of cheques in transit. The usage of CTS cheques also means quicker clearance, shorter clearing cycle and speedier credit in your account. Depending on whether the cheque is local or outstation, it can get cleared on the same day as proposed by the RBI governor now.

The biggest advantage is that CTS-compliant cheques are more secure, and less prone to frauds.