The Reserve Bank of India (RBI) on Thursday introduced a new cheque-clearing mechanism, aimed at improving the efficiency and speed of financial transactions in the country.
In a latest development, RBI Governor Shaktikanta Das during the Monetary Policy Meeting (MPC) announced that the cheque clearance times in the country will soon be reduced from days to just a few hours. This seems a major relief for many, as the cheque clearance in the country takes two to three days as of the current system.
From days to hours – The new same-day cheque clearance
The latest announcement by RBI will transition from the batch processing mode of Cheque Truncation System (CTS) to a continuous clearing model.
RBI Governor Shaktikanta Das
This means that under the new cheque clearing mechanism the cheques will be scanned, presented, and cleared on a rolling basis throughout the working or business day, rather than in pre-scheduled batches.
With this process, the cheque clearance time will be reduced from 2-3 days to just a few hours.
— ReserveBankOfIndia (@RBI) August 8, 2024
This expedited process is expected to bring cheque clearing on par with other rapid payment methods like National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS), and Immediate Payment Service (IMPS).
What is the current existing system – CTS?
Ahead of the new cheque clearance mechanism, let take a look at the current existing system known as the Cheque Truncation System (CTS).
CTS is a method where the physical movement of a cheque is halted, and instead, an electronic image of the cheque is sent to the paying bank for clearance. This system was introduced to eliminate the delays and costs associated with physically transporting cheques from one branch to another.
CTS is a method where the physical movement of a cheque is halted, and instead, an electronic image of the cheque is sent to the paying bank for clearance
Although this system streamlined many challenges including the cheque-clearing process, but still operates on a batch processing mode. This, therefore, leads to a clearance time of up to two working days.
Benefits for customers
With this new system, customers will enjoy faster credit of funds into their accounts, which will significantly enhance liquidity and ease of financial transactions.
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Although, RBI has not yet released a detailed guidelines on how this will be implemented, but the central bank’s announcement has already generated excitement among account holders and financial institutions alike.
