Banks Are Doing This After You Deposit a Cheque; Read the Full Article to Know the Effects

Cheques have long been a staple of India’s payments infrastructure, but their clearance has often been slow and cumbersome. To modernise and speed up the system, the Reserve Bank of India (RBI) is introducing major reforms that will shift cheque clearing from batch-based settlement to a continuous, near real-time (on-realisation) model. 

ICICI Bank recently announced that, in line with RBI’s mandate, it will begin same-day cheque clearing for eligible instruments from October 4, 2025. This article explores what the new rules entail, how banks, particularly ICICI, are gearing up, what customers must do, and what the broader impacts are likely to be.

Background: Why Change Cheque Clearance?

The existing system and its limitations

Currently, cheque clearing in India works under the Cheque Truncation System (CTS), in which banks collect, scan, and transmit cheque images in batches during prescribed clearing cycles. Because of this batch mode, many cheques take T+1 or even T+2 working days before they are fully settled.

This delay causes friction: customers must wait to access funds, businesses may face cash-flow issues, and banks shoulder settlement risk over longer periods. In an era when UPI, RTGS, and IMPS settle instantly or quickly, cheques lag behind in speed and efficiency.

RBI’s rationale for reform

To bring cheque processing more in line with modern payment systems, in August 2025 the RBI announced a shift to a continuous clearing and settlement on realisation model.

The goals are multi-fold:
 

• Faster fund availability for customers
   
• Reduced settlement and operational risk for banks
   
• Greater alignment among different payment modes
   
• Higher customer satisfaction and competitive parity with digital instruments
   

Banks have been instructed to upgrade their systems, adopt new processes, and communicate the changes to customers well in advance.

The New Cheque Clearing Regime: Architecture and Timeline

Here we set out how the reforms will be rolled out, with phases, deadlines, and obligations.

Two phases of implementation

The transition will occur in two phases:
 

The table above lays out the two phases of the RBI’s reform rollout in chronological order, showing how the confirmation deadlines evolve. It helps the reader clearly see the progression in timing, obligations, and automatic approval logic.

As seen, Phase 1 introduces same-day confirmation with a uniform 7:00 PM deadline, while Phase 2 tightens this to a 3-hour window. The automatic approval clause in both phases ensures that if the drawee bank doesn’t respond, the cheque is treated as honoured, thereby protecting the presenting party from undue delays.

Operational modalities and settlement cycle

Under the new system:
 

• Between 10:00 AM and 4:00 PM, banks continuously receive, scan, and forward cheque images to the clearing house and onward to drawee banks.
   
• Drawee banks must process and confirm (honour or dishonour) within the allotted deadline.
   
• In Phase 2, item expiry (deemed approval) will occur if no confirmation is given within three hours of presentation.
   
• Settlements (i.e., funds transfers across banks) will occur on an hourly basis starting from 11:00 AM onward.
   
• Once settlement is confirmed, the presenting bank is required to credit the beneficiary’s account no later than one hour after settlement (subject to standard checks and safeguards).
   

These mechanisms ensure that cheque clearing is no longer constrained by discrete batch windows but works continuously throughout banking hours, minimizing lag and maximizing efficiency.

ICICI Bank’s Strategy and Customer Advisory

ICICI’s alignment with RBI’s directive

ICICI Bank has proactively announced that it will implement same-day cheque clearing from October 4, 2025, in compliance with RBI’s new rules.

To facilitate smooth processing:
 

• cheques must be deposited before the branch’s cut-off time to be eligible for same-day clearance.
   
• For cheques above ₹5 lakh, Positive Pay will be mandatory; without it, such cheques will be returned.
   
• For cheques above ₹50,000, the bank encourages, but does not strictly require, Positive Pay (in Phase 1).
   
• The bank is urging customers to issue cheques carefully (no overwriting, accurate details, sufficient balance) to avoid rejections or delays.
   

NOTE: Under new RBI guidelines, only cheques validated via Positive Pay are protected under the dispute resolution mechanism, making compliance more critical.

What customers must do?

Customers need to be vigilant and follow certain best practices:
 

1. Use Positive Pay for high-value cheques — at least for amounts above ₹50,000 (recommended) and mandatory above ₹5 lakh.
    
2. Issue clean cheques: avoid overwriting, corrections, or mismatches between words and figures.
    
3. Deposit within cut-off time: earlier deposits are more likely to be processed swiftly.
    
4. Keep sufficient balance and correct endorsement details.
    
5. Monitor confirmation status: banks will notify customers through SMS/app once a cheque is honoured or deemed approved.
    

Banks will likely publish their branch-wise cut-off times for cheque acceptance to ensure customers know the window for same-day processing.

Anticipated Impacts and Challenges

Benefits to customers and banking system
 

• Faster liquidity: customers will no longer have to wait one or more days — funds may reach accounts the same day.
   
• Reduced settlement risk: shortened exposure window benefits banks and clearing houses.
   
• Improved operational efficiency: eliminating batch waits lowers stagnation in processing.
   
• Encouraging formal banking behaviour: small firms and traditional sectors that still rely on cheques will benefit from improved reliability.
   
• Parity with digital payments: cheque transactions will come closer to instant modes in speed.
   

Potential challenges and caveats
 

• Technology readiness: banks must upgrade infrastructure, connectivity, and staff training to handle continuous throughput.
   
• System bottlenecks: surges in cheque volume or technical failures could stress real-time processing.
   
• Fraud risk: faster settlement demands stronger fraud-detection tools (hence the role of Positive Pay).
   
• Customer confusion: overlapping rules, cut-offs, and phased rollout may cause transitional uncertainty.
   
• Liability and reversals: once cheque is “deemed approved,” reversing a dishonoured cheque may be complex, especially if fraud surfaces later.

Comparison: Present vs Post-Reform Cheque Clearance

Below is a comparative snapshot:
 

This comparison illustrates the stark contrast between the legacy and reformed systems: what was once a multi-day process becomes a same-day or even intra-day process.

What This Means for the Future of Cheque Usage?

While the reforms significantly speed up cheque processing, they come at a time when digital payments are rapidly gaining dominance. Some expected consequences:

• Gradual decline in cheque volumes: With UPI, NEFT, RTGS, and other real-time methods more convenient, cheque usage may shrink over time.
   
• Better coexistence: For certain transactions (e.g. government, corporate, large payments), cheques will remain relevant, but with faster clearing, their utility improves.
   
• Incentive for formal banking in underserved regions: Faster cheque processing could encourage adoption by customers who still rely on physical instruments.
   
• Pressure on smaller banks: Smaller or under-resourced banks might struggle to upgrade infrastructure in time, risking noncompliance or delays.
   

Nevertheless, the reforms essentially modernize a legacy instrument rather than eliminate it. Cheques will persist, but become more efficient, secure, and responsive.

Conclusion

The RBI’s transition to continuous cheque clearing starting October 4, 2025 marks a landmark reform in India’s payments ecosystem. By compressing what used to take days into hours, the reforms promise greater customer convenience, lower settlement risk, and better alignment with digital payments. ICICI Bank’s announcement of same-day cheque clearing, with mandatory Positive Pay for high-value cheques, illustrates how commercial banks are preparing to comply.

For customers, the message is clear: use clean cheques, follow bank cut-offs, and adopt Positive Pay where needed. While challenges will arise, including technological readiness and fraud mitigation, the net effect should be a more agile, trustworthy cheque system. As this reform takes effect, India may well move closer to a truly real-time financial infrastructure, where the speed of a cheque no longer lags behind a UPI transfer.

 

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