Faster Cheque Clearing Coming Soon: RBI to Cut Settlement Time to Hours
The Reserve Bank of India (RBI) is set to revolutionize cheque payments with a new system that will drastically cut settlement times from days to just a few hours. The new framework, which shifts from a batch-processing model to a continuous clearing system, aims to significantly improve the efficiency of cheque-based transactions and enhance the customer experience.
Key Changes and Timeline:
- Phase 1: Beginning October 4, 2025, banks will scan and submit cheques to the clearing house continuously between 10:00 AM and 4:00 PM. Drawee banks will have until 7:00 PM on the same day to confirm each cheque. If no confirmation is received, the cheque is automatically approved for settlement.
- Phase 2: From January 3, 2026, the confirmation window will be shortened to just three hours. For example, a cheque presented between 10:00 AM and 11:00 AM must be confirmed by 2:00 PM. Unconfirmed cheques will be deemed approved after this time.
- Faster Fund Release: Once a settlement is completed, the presenting bank is required to release the funds to the customer within one hour.
Additional RBI Update:
In a separate move to boost liquidity and international trade, the RBI has also permitted the investment of surplus foreign currency rupee balances in government bonds. This step is expected to further improve financial market liquidity.
How the New System Works:
The new Cheque Truncation System (CTS) will operate on a “continuous clearing and settlement-on-realization” model. This means that as soon as a cheque is presented, its image is sent to the drawee bank, which must then promptly confirm whether it will be honored. This immediate, real-time process is what allows for the rapid settlement times.