The Reserve Bank of India has stated that cheque clearance will be expedited to within a few hours. Currently, the process takes approximately two to three days. This announcement was made by the governor of the Reserve Bank of India during the Monetary Policy Committee meeting. This expedited cheque payment method will benefit both the payer and the payee.
This change is set to significantly reduce the time taken for cheque clearance and bring it closer to the rapid transfer speeds offered by National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS).
The NEFT transactions are available 365 days a year and can be carried out at any time. Money is transferred in batches and processed in 48 half-hourly slots throughout the day. There is no limit on the maximum amount of money that can be transferred in a single day using NEFT transactions.
RTGS can be utilized for consumer and interbank transactions at any time of day. It enables immediate transfer of large sums of money. IMPS is a real-time payment service that operates 24/7, even on bank holidays. IMPS permits instant transfer of relatively small amounts, up to Rs. 2 lakhs.
What is the present cheque clearance rule
The Cheque Truncation System (CTS) clearing process runs in batch mode and can take up to two working days to complete.
What is the new cheque clearance rule
With the introduction of continuous clearing and “on-realization-settlement” in CTS, it is suggested that the clearing cycle will be reduced. This implies that on the day of presentation, cheques will be cleared in a few hours.
What is Cheque Truncation?
Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point by the presenting bank en-route to the paying bank branch. In its place an electronic image of the cheque is transmitted to the paying branch through the clearing house, along with relevant information like data on the MICR band, date of presentation, presenting bank, etc. Cheque truncation thus obviates the need to move the physical instruments across bank branches, other than in exceptional circumstances for clearing purposes. This effectively eliminates the associated cost of movement of the physical cheques, reduces the time required for their collection and brings elegance to the entire activity of cheque processing.
What are the benefits of CTS to customers?
CTS enables fast and cheap realisation of funds to customers as compared to traditional mechanisms. Under grid-based CTS clearing, all cheques drawn on bank branches falling within in the grid jurisdiction are treated and cleared as local cheques. No outstation cheque collection charges to be levied if the collecting bank and the paying bank are located within the jurisdiction of the same CTS grid even though they are located in different cities.
CTS also benefits issuers of cheques. The Corporates if needed can be provided with images of cheques by their bankers for internal requirements, if any. What is Positive Pay System for Cheques?
Positive Pay System (PPS) for CTS is an additional indicator provided by NPCI to all banks to facilitate the clearing process and pre-empt cheque-related frauds and shall form part of prudent practices followed by banks for payment processing. It has been introduced to augment customer safety in cheque payments and reduce instances of fraud occurring on account of tampering of cheque leaves.
Banks have been advised to enable PPS facility for all account holders issuing cheques for amount of Rs 50,000 and above. While availing of this facility is at the discretion of the account holder, banks may consider making it mandatory in case of cheques for amounts of Rs 5,00,000 and above.
If a customer desires to see the physical cheque issued by him for any reason, what are the options available?
Under CTS the physical cheques are retained at the presenting bank and do not move to the paying banks. In case a customer desires, banks can provide images of cheques duly certified/authenticated. In case, however, a customer desires to see / get the physical cheque, it would need to be sourced from the presenting bank, for which a request has to be made to his / her bank. An element of cost / charge may also be involved for the purpose. To meet legal requirements, the presenting banks which truncates the cheques need to preserve the physical instruments for a period of 10 years.
