RBI Directs Banks to Process Cheques Within Hours from October 4

Starting October 4, 2025, the Reserve Bank of India (RBI) is set to implement a landmark change in the way cheques are cleared in the country, introducing a faster, real-time clearing system. Under the current Cheque Truncation System (CTS), cheques can take one to two working days to clear, depending on when they are deposited. This delay is largely due to batch processing, where cheques are processed in groups, leading to inefficiencies and slower settlement times. The new system seeks to eliminate these delays, offering near-instant processing, thus enhancing customer convenience and reducing settlement risks.

Under the revamped mechanism, cheques will be scanned, processed, and settled continuously during business hours instead of being handled in batches. This will drastically reduce the clearing cycle from the existing T+1 system—where T denotes the day of cheque deposit—to just a few hours. Customers will no longer have to wait for a full day or more for their cheques to be cleared, thereby making financial transactions more seamless and efficient.

The RBI has planned a phased implementation for this transition. Phase 1, effective from October 4, 2025, to January 2, 2026, requires banks to confirm (either approve or reject) all cheques presented to them on the same day by 7:00 PM. If a bank fails to respond by this deadline, the system will automatically treat the cheque as approved and include it for settlement. This ensures that no cheque is left pending due to inaction, establishing accountability and maintaining a smooth flow of transactions. The cut-off for all cheque processing during this phase will be 7:00 PM.

Phase 2, beginning January 3, 2026, further accelerates the clearing process. Under this phase, banks will be required to confirm cheques within three hours of receipt. For instance, if a cheque is received between 10:00 AM and 11:00 AM, it must be confirmed by 2:00 PM (three hours from the latest time of receipt). Should a bank fail to confirm the cheque within this window, it will automatically be considered approved and cleared. This approach ensures real-time settlement, significantly improving operational efficiency and customer experience.

The introduction of this system is expected to have wide-ranging benefits. By reducing the time taken to clear cheques, customers can access funds much faster, improving liquidity and financial planning. Businesses will also benefit as faster cheque clearing reduces delays in receivables, allowing for smoother cash flow management. The RBI’s initiative aligns with its broader objectives of modernizing India’s banking infrastructure, leveraging technology to streamline operations, and minimizing settlement risks associated with delayed processing.

This move also reflects the RBI’s commitment to providing more convenient, technology-driven banking services. Faster cheque clearing reduces dependency on manual interventions and the risk of errors, ensuring greater reliability in financial transactions. Banks, in turn, will need to upgrade their systems and processes to comply with the new real-time clearing requirements, fostering digital transformation across the banking sector.

In summary, the RBI’s new cheque clearing system marks a significant improvement over the existing CTS. By enabling continuous scanning, processing, and settlement of cheques within hours, the initiative reduces transaction delays, minimizes settlement risks, and enhances the overall efficiency of banking operations in India. The phased approach ensures smooth implementation, with Phase 1 focusing on daily confirmations by 7:00 PM and Phase 2 introducing a strict three-hour confirmation window, ultimately benefiting both customers and banks alike.