Starting October, banks will clear your checks within hours
What's the story
The Reserve Bank of India (RBI) will launch a new system to clear checks within hours, starting October 4, 2025. The move is aimed at reducing the current timeframe of up to two working days for check clearance. The new system will work on continuous clearing, with Phase 1 starting on October 4, 2025, and Phase 2 beginning on January 3, 2026.
Process overhaul
Current check truncation system
The current Check Truncation System (CTS) processes checks with a clearing cycle of up to two working days. To make this process more efficient and reduce settlement risk for participants, the RBI has decided to shift CTS from batch processing to continuous clearing with 'on-realisation-settlement.' This change is expected to improve customer experience significantly.
Operational details
How the new system will work
The new check clearance system will work continuously during business hours, from 10:00am to 4:00pm. Checks received by branches will be scanned and sent to the clearing house by banks immediately during this presentation session. For every presented check, the drawee bank will have to generate either a positive confirmation (for honored checks) or a negative one (for dishonored ones).
Timeframes
Time limits for confirmations
During Phase 1, drawee banks will have to confirm presented checks by the end of the confirmation session (7:00pm). If not confirmed, these will be deemed approved and included for settlement. In Phase 2, the item expiry time of checks will change to T+3 clear hours. For instance, checks received between 10:00am and 11:00am will have to be confirmed by 2:00pm (three hours from 11:00 AM).
Payment processing
What banks need to do?
Upon settlement completion, the clearing house will share positive and negative confirmations with the presenting bank. The presenting bank will process this information and release payments to customers immediately, but not later than one hour from successful settlement. This is subject to usual safeguards. The RBI has also directed banks to adequately inform their customers about these changes in the check clearing process.