From same day credit to credit within hours, how RBI is revolutionising cheque clearance process
This will be implemented in 2 phases, with the first phase will start from October 4, 2025 and run until January 2, 2026. The phase 2 will kick off on January 3, 2026.
'It has been decided to transition CTS to continuous clearing and settlement on realisation in two phases. Phase 1 shall be implemented on October 4, 2025 and Phase 2 on January 3, 2026', the directive noted. Read on to know more about how this will impact cheque settlement in the country. How are cheques cleared at present? Currently, banks use the CTS, or Cheque Truncation system to process cheques. This system eliminates the need to physically transfer paper cheques between banks, which can take a lot of time. Instead, on the same day, it captures an electronic image along with other important details of the cheque and sends it to the drawee bank, the one responsible for paying the amount specified on the cheque. The return cycle is completed the next day, after which the settlement takes place. Once the settlement process is done, the customer receives their funds. In other words, all this takes place within a day or two after the cheque is deposited. But, moving forward, cheques will be cleared in just a few hours, and usually on the same day if deposited during business hours.
What will change with cheque processing starting October 4? There will be a single presentation session from 10 am to 4 pm, but the confirmation session will run from 10 am to 7 pm. This is an internal process for banks to handle and confirm cheques. 'Cheques received by the branches shall be scanned and sent to the clearing house by the banks immediately and continuously during the presentation session', the circular added. The clearing house will release the cheque images to drawee banks on a continuous basis. Once they get the cheque image, the drawee banks will then be required to process the cheques continually and in real-time. They also will have to let the clearing house know if the cheque was honoured or dishonored immediately after processing. So for every cheque presented, the drawee bank will either provide a positive confirmation for honoured cheques, or negative confirmation for dishonoured ones. 'Each cheque will contain the 'Item Expiry Time' which indicates the latest time by which confirmation for the presented instrument needs to be provided by the drawee bank', it added. During phase 1, this time has been set at 7 pm. As explained in the directive, 'During phase 1 (From October 4 to January 2, 2026), drawee banks shall be required to confirm (positively / negatively) cheques presented on them latest by end of confirmation session (i.e. 7:00 PM)'. It also adds that in the absence of any confirmation, the cheque will be 'deemed to have been approved and included for settlement'. What will change starting January 2026? During phase 2, 'settlement will be arrived every hour till the end of confirmation session, based on the positive confirmations received from drawee banks and cheques considered deemed approved', adds the circular. Effective January 2026, the item expiry time of cheques will also change from 7 pm to T+3 hours. This means that any cheque that has been presented for clearing at 11 am and 12 noon on a given day, will have to be confirmed either positively or negatively by 3 pm i.e. 3 hours from 12 noon. If the drawee bank does not provide confirmation for any cheque within these 3 hours, they will be deemed to have been positively confirmed for settlement. How will this impact payments? Once the clearing house releases information whether the cheque has been cleared or not, the presenting bank shall credit funds to the customers account immediately, but no later than 1 hour.
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