Revolutionizing Payments: RBI Ushers in Real-Time Cheque Clearing from October

Image Source: Indiatimes

In a landmark step to redefine the efficiency and speed of India’s payment systems, the Reserve Bank of India (RBI) announced today, August 13, 2025, the introduction of continuous clearing and settlement on realisation in the Cheque Truncation System (CTS). The historic move promises to slash cheque clearing times from the current two-day cycle to a matter of hours, marking a dramatic leap in banking convenience and security. The transition will occur in two distinct phases: Phase 1 commences on October 4, 2025, and Phase 2 begins January 3, 2026.

Key Highlights of RBI’s Announcement

Cheques presented at any branch will be scanned and entered into the clearing house continuously between 10:00 AM and 4:00 PM, abolishing batch processing and bringing in seamless real-time operations.

For every cheque submitted, drawee banks must provide either a positive confirmation (honoured) or negative confirmation (dishonoured) by a stipulated time; if not, cheques will be deemed approved for settlement.

Presenting banks are required to credit the customer’s account within one hour of successful settlement.

A Two-Phase Transformation

Phase 1: Implementation from October 4, 2025

Single presentation session from 10:00 AM to 4:00 PM for all participating banks.
Drawee banks must confirm cheques—approved or declined—by 7:00 PM for every presented item.
If confirmation isn’t provided by the deadline, those cheques will be considered as “deemed approved” and automatically included for settlement.
Funds are credited to customers promptly, within an hour of settlement finalisation, subject to regular safeguards.

Phase 2: Implementation from January 3, 2026

The item expiry for cheques tightens: every cheque must be confirmed by the drawee bank within three hours of its receipt; for instance, a cheque received at 10:00 AM must be approved or declined by 1:00 PM.
Items not actively confirmed will again be treated as “deemed approved” and settled accordingly.
After settlement, the clearing house will promptly communicate the final confirmation status to the presenting bank, which will release payments to customers without delay.

Why Is This Change So Significant?

Transforming the Cheque Truncation System (CTS) from batch processing (T+1 to T+2 days clearing cycle) to continuous clearing and settlement is a game-changer. With the move:

Customers and businesses will experience rapid fund availability, ensuring liquidity and quicker financial decision-making.

The settlement risk for banks is dramatically reduced, since on-realisation settlement leaves no pending period where dishonour or fraud risks could accrue.

The requirement for continuous customer notification and readiness—banks must educate and prepare their users for this high-speed, transparent system.

How Will the Process Work Post-Change?

Cheques deposited during the business session are instantly scanned and transmitted electronically to the clearing house.

Drawee banks provide timely confirmation of each item, eliminating previous delays.

Once settlements are completed by the clearing house, presenting banks process these and release customer credits quickly.

This reduction in time aims to modernize banking, cut processing costs, and increase overall system reliability.

Customer Impact: What to Expect

Cheque clearance time shortened from up to two working days to as little as three hours (from January 2026).

Immediate notification of dishonour or approval ensures transparency and accountability.

Faster access to funds for personal and business transactions increases market trust and banking satisfaction.

Preparing for the Transition

Banks across India must upgrade software and processes and ramp up consumer education.

RBI is actively directing banks to disseminate these changes to customers and ensure readiness for smooth participation in both phases.

Customers should expect updated notifications and may need to familiarize themselves with new cheque-handling protocols.

Conclusion

Today’s announcement marks a transformative moment for Indian banking, with the RBI leading the way toward faster, more secure, and customer-centric payments infrastructure. Cheque users will soon enjoy almost real-time clearance, drastically reduced waiting periods, and a surge in transaction confidence. As Phase 1 and Phase 2 roll out in the coming months, India’s payment ecosystem promises to grow stronger, smarter, and quicker.

Source: Business Standard, Vaarthabharati, Devdiscourse