RBI's New Rule: Faster Cheque Clearance, Reduced Fraud Risk and Quicker Customer Benefit

The Reserve Bank of India (RBI) has introduced new guidelines under the Cheque Truncation System (CTS) aimed at speeding up cheque clearance and reducing the scope for fraud. From October 4, 2025, banks will adopt real-time settlement and continuous processing, which is expected to improve customer experience and bring greater efficiency to the banking system.

What is Changing in Cheque Processing?

Currently, cheque clearance in India functions on a batch-processing model, which often delays settlement. Under the new framework, cheques will be processed digitally throughout working hours using scanned images and Magnetic Ink Character Recognition (MICR) data. This eliminates the need for physical movement of cheques and significantly lowers operational costs for banks.

From October 4, 2025, banks will begin transmitting cheque images and MICR details to the clearing house between 10 a.m. and 4 p.m. continuously during the day. These images will then be shared with the drawee bank (the bank on which the cheque is drawn) for approval in near real-time.

Continuous Confirmation Window

Once a drawee bank receives the cheque image, it must act immediately. The confirmation window will remain open from 10 a.m. to 7 p.m., during which banks must verify and process incoming cheques.

Each cheque will carry a set “expiry time,” and banks will be required to confirm or reject the transaction within the given timeframe. If no response is received, the cheque will automatically be treated as approved and settled.

Two-Phase Implementation Plan

RBI has decided to roll out these changes in two stages:

• Phase 1 (October 4, 2025 – January 2, 2026):
  Banks must confirm cheque transactions by 7 p.m. on the same day. If they fail to do so, the cheque will be automatically approved and settled.

• Phase 2 (From January 3, 2026 onwards):
  The confirmation window will be shortened. Banks will have only three hours to act. For instance, if a cheque is presented at 10 a.m., it must be confirmed by 2 p.m. If not, it will be automatically deemed approved and settled at 2 p.m.

After settlement, the clearing house will notify the bank about approval or rejection, and the customer’s account will be credited within an hour.

Customer Benefits of Faster Cheque Clearance

According to financial experts, including Adhil Shetty, CEO of BankBazaar.com, the continuous clearance mechanism will reduce cheque settlement to just a few hours instead of days.

Even though digital payment systems like UPI, NEFT, and RTGS dominate, cheques are still widely used for large transactions and corporate payments. The new system ensures:

• Faster credit: Customers may receive funds on the same day.

• Reduced fraud risk: As the process relies on digital images and real-time verification, the chances of tampering or duplication fall sharply.

• Improved efficiency: Businesses can manage their cash flows better as funds become available more quickly.

• Lower operational risks: Since physical movement of cheques ends, the risk of cheques being lost or misplaced also disappears.

Expert Take

Banking analysts believe that the new CTS mechanism will bring faster settlements, fewer delays, and greater security to cheque-based transactions. Depending on the type of cheque, clearance may even be completed on the same day.

This move is expected to enhance transparency, strengthen customer trust in cheque payments, and modernize India’s banking infrastructure.

✅ In Summary: With the RBI’s revised rules, cheque clearance in India is set to become faster, more secure, and more efficient. Customers will benefit from quicker access to funds, reduced chances of fraud, and a smoother banking experience, while banks save costs and improve operational workflows.