By Kavita Mistry 
The Reserve Bank of India (RBI) will introduce a faster cheque clearance system from October 4, significantly reducing settlement time from the current two working days to just a few hours. This improvement will be achieved by upgrading the Cheque Truncation System (CTS) from its existing batch-processing format to a continuous clearing and settlement-on-realisation model. The change will be implemented in two phases: Phase 1 beginning October 4 and Phase 2 starting January 3.
RBI’s New CTS Model to Enable Real-Time Cheque Clearance and Hourly Settlements
Under the revised process, banks will scan and transmit cheques to the clearing house continuously between 10:00 AM and 4:00 PM. The clearing house will instantly forward cheque images to the drawee bank, prompting them to confirm whether each cheque is honoured or dishonoured. In Phase 1, drawee banks will have until 7:00 PM the same day to confirm. If no response is received by then, the cheque will be automatically treated as approved for settlement.
In Phase 2, confirmation times will be shortened to just three hours. For instance, cheques received between 10:00 AM and 11:00 AM must be confirmed by 2:00 PM. Any cheque not confirmed within the designated time frame will be deemed approved. Settlement will occur hourly from 11:00 AM until the close of the presentation window, accelerating the flow of funds across the banking system.
RBI Mandates Faster Fund Release and Boosts Market Liquidity
Once settlement is finalised, the presenting bank will be required to release funds to customers within an hour, subject to standard verification. This step aims to provide quicker access to funds and minimise delays that currently frustrate customers relying on cheque payments.
According to the RBI, this initiative will enhance efficiency in cheque-based transactions, reduce settlement delays, and improve the overall customer experience. Banks have been directed to prepare for the transition and communicate the new timelines to their customers. Additionally, the RBI has allowed surplus foreign currency rupee balances to be invested in government bonds, a measure expected to boost liquidity in the financial markets.
Summary:
The Reserve Bank of India will implement a faster cheque clearance system from October 4, cutting settlement time from two days to hours through continuous processing. Rolled out in two phases, it mandates hourly settlements, quicker bank confirmations, faster fund release, and permits surplus forex rupee balances investment in government bonds.