The Reserve Bank of India (RBI) plans to reduce the clearing time for bank cheques to just a few hours, as part of a major initiative to enhance the ease of doing business in the country, RBI Governor Shaktikanta Das announced on Thursday.
Currently, the Cheque Truncation System (CTS) operates in a batch processing mode, with a clearing cycle of up to two working days. The RBI proposes to introduce continuous clearing with 'on-realisation-settlement' in CTS, which will significantly shorten the clearing cycle, Das explained.
“This means that cheques will be cleared within a few hours on the day of presentation. This will speed up cheque payments and benefit both the payer and the payee,” the RBI chief added.
Cheque truncation involves replacing the flow of physical cheques issued by a drawer from the presenting bank to the paying bank branch with an electronic image. Instead of sending the physical cheque, an electronic image is transmitted to the paying branch through the clearing house, which conveys relevant information such as the MICR band, date of presentation, and the presenting bank.
This process eliminates the need to move physical cheques across bank branches, except in exceptional circumstances, thus reducing the associated costs and expediting cheque processing.
CTS facilitates quicker and cheaper realisation of funds for customers compared to traditional methods that involve the physical movement of cheques. Under grid-based CTS clearing, all cheques drawn on bank branches within the jurisdiction of the grid are treated and cleared as local cheques. No outstation cheque collection charges are levied if the collecting bank and the paying bank are located within the same CTS grid, even if they are in different cities.
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