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Continuous Clearing and Settlement on Realisation in Cheque Truncation System (CTS)

Reserve Bank of India (RBI) has issued direction on continuous clearing and settlement on realisation in Cheque Truncation System (CTS).

What is Cheque Truncation System (CTS)?

  • Cheque Truncation System (CTS) involves halting the physical movement of the cheque and its replacement by images of the instrument and the corresponding data contained in the MICR line. 
  • In CTS, 3 images are taken of each cheque – front Gray Scale, front Black & White and back Black & White.
  • MICR (Magnetic Ink Character Recognition) is a 9-digit code printed at the bottom of cheques using magnetic ink – first 3 digits indicate City Code, middle 3 digits indicate Bank Code and the last 3 digits indicate Bank Branch Code.
  • Only CTS-2010 standards compliant instruments can be presented for clearing through CTS.
  • The presenting banks which truncates the cheques need to preserve the physical instruments for 10 years.

From when will the continuous clearing and settlement on realisation in CTS be implemented?

CTS will transition from the current approach of batch processing to continuous clearing with settlement on realisation in 2 phases. Phase 1 shall be implemented on October 4, 2025 and Phase 2 on January 3, 2026.

What will be the modalities for continuous clearing with settlement on realisation in CTS?

  • There shall be a single presentation session from 10:00 AM to 4:00 PM.
  • Cheques received by the branches shall be scanned and sent to the clearing house by the banks immediately and continuously during the presentation session.
  • The clearing house will in turn release the cheque images to drawee banks on a continuous basis.
  • The confirmation session shall start at 10:00 AM and close at 7:00 PM.
  • For every cheque presented, the drawee bank shall generate either positive confirmation (for honoured cheques) or negative confirmation (for dishonoured cheques).
  • Each cheque will contain the ‘Item Expiry Time’ which indicates the latest time by which confirmation for the presented instrument needs to be provided by the drawee bank.
  • Processing by drawee banks is to be done continuously throughout the day and on a real time basis as soon as cheque images are received.
  • Information of positive / negative confirmation shall be sent by the drawee banks to the clearing house immediately after processing.

What will be timelines for inward processing?

  • During phase 1 (From October 4 to January 2, 2026), drawee banks shall be required to confirm (positively / negatively) cheques presented on them latest by end of confirmation session (i.e. 7:00 PM) else those will be deemed to have been approved and included for settlement. Item expiry time for all cheques shall be set as 7:00 PM in phase 1.
  • In Phase 2 (from January 3, 2026), the item expiry time of cheques shall be changed to T+3 clear hours. For example, the cheques received by drawee banks between 10:00 AM and 11:00 AM will have to be confirmed positively or negatively by them by 2:00 PM (3 hours from 11:00 AM). Cheques for which confirmation is not provided by the drawee bank in the prescribed 3 hours shall be treated as deemed approved and included for settlement at 2:00 PM.

What are the directions on settlement and releasing payment to customers?

  • No accounting entries (settlement) will be posted for presentation of cheques.
  • Starting from 11:00 AM, settlement will be arrived every hour till the end of confirmation session, based on the positive confirmations received from drawee banks and cheques considered deemed approved.
  • No accounting entries shall be passed for cheques with negative confirmation.
  • On completion of settlement, clearing house shall release the information of positive and negative confirmations to the presenting bank.
  • The presenting bank shall process the same and release the payment to the customers immediately, but within 1 hour from successful settlement.

What is Positive Pay System (PPS) for Cheques?

  • National Payments Corporation of India (NPCI) had developed the facility of Positive Pay in CTS involving a process of reconfirming key details of large value cheques. 
  • Under this process, the issuer of the cheque submits electronically, through channels like SMS, mobile app, internet banking, ATM, etc., certain minimum details of that cheque (like date, name of the beneficiary / payee, amount, etc.) to the drawee bank, details of which are cross checked with the presented cheque by CTS. 
  • Banks were advised to enable PSS facility for all account holders issuing cheques for amounts of ₹50,000 and above. 
  • While availing of this facility is at the discretion of the account holder, banks may make it mandatory in case of cheques for amounts of ₹5,00,000 and above.
  • PPS was implemented from January 01, 2021.

What is ‘One Nation One Grid’?

  • Under CTS, cheque processing locations in India were divided into 3 grids – Chennai, Mumbai and New Delhi. 
  • Under the One Nation One Grid, the 3 grids were planned to be merged into a single grid for the nation. 


References

National Payments Corporation of India. (n.d.). 'Cheque Truncation System '. Retrieved from https://www.npci.org.in/PDF/cts/Product-Booklet.pdf

Reserve Bank of India. (2020, September 25). 'Positive Pay System for Cheque Truncation System'. Retrieved from https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11969

Reserve Bank of India. (2022, October 31). 'Cheque Truncation System'. Retrieved from https://rbi.org.in/Scripts/FAQDisplay.aspx?Id=63

Reserve Bank of India. (2025, August 13). 'Introduction of Continuous Clearing and Settlement on Realisation in Cheque Truncation System'. Retrieved from https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12891&Mode=0


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