Collection of Instruments and the Cheque Collection Policies of Banks in India

National Consumer Disputes Redressal Commission has framed Cheque Collection Policies (CCPs) of Banks. The policy framed by the Commission covers the time frame for the collection of local and outstation cheques.

The time frame for Local Clearing: The credit and debits of the local cheque shall be given on the same day or at the most the next day of their presentation in the clearing. The credit shall be regularized on the closure of relative return clearing. In any case, withdrawal shall be allowed on the same day of return clearing or maximum within an hour of commencement of business on the next working day, subject to usual safeguards.

RBI in its Statement on Developmental and Regulatory Policies on Thursday (August 8, 2024) announced the implementation of Continuous Clearing of Cheques under the Cheque Truncation System (CTS). The Cheque Truncation System (CTS) currently processes cheques with a clearing cycle of up to two working days. To improve the efficiency of cheque clearing and reduce settlement risk for participants, and enhance customer experience, it is proposed to transition CTS from the current approach of batch processing to a continuous clearing with ‘on-realization-settlement’. Cheques will be scanned, presented, and passed in a few hours and continuously during business hours. The clearing cycle will reduce from the present T+1 days to a few hours. RBI said that the detailed guidelines in this regard shall be issued shortly.

Time frame for Collection of outstation Cheques: The time frame for collection of cheques drawn on State Capitals / major cities / other locations shall be respectively 7/10/14 days. In the event of any delay in collection beyond this period, interest shall be paid to the customer at the rate specified in the Cheque Collection Policy of the bank. In case the rate is not specified by the bank, the applicable rate shall be the interest rate on Fixed Deposits for the corresponding maturity.  If the cheque is collected before the timeframe for collection credit shall be made immediately on receipt of cheque proceeds..

Cheques / Instruments lost by banks in transit or clearing process: Where a cheque is lost in transit or the clearing process or at the paying bank’s branch, the bank should immediately bring the same to the notice of the account holder. The account holder can inform the drawer of a cheque to record a stop payment. Informing the account holder about the loss of the cheque, enables him to take care, of or arrange funds to pass the cheques already issued by him. The collecting has to reimburse any expenses incurred by the customer for getting a duplicate cheque or instrument instead of a lost cheque. The bank should also reimburse interest for the delay in obtaining the duplicate cheque. However, the collecting banker has the right to recover the amount reimbursed to the customer from the paying bank if the cheque/instrument has been lost at the paying bank’s branch. 

Payment of interest for Delays in collection of bills: Where a bill was lodged by the customer in his bank for collection (including purchased/discounted bills) and collection of the bill if delayed from the normal transit period, the lodger’s bank should pay interest at the rate of 2%p.an over SB interest for the delayed period. The delayed period is calculated after making allowance for a normal transit period based upon a time frame of 2 days for each of the following: Dispatch of bills; presentation of bills of drawees; Remittance of proceeds to the lodger’s bank; crediting the proceeds to drawer’s account. If the delay is attributed to the drawee’s bank, the lodger’s bank may recover interest for such delay from that bank. Ideally, the lodger’s bank put in its covering memo the rate of interest payable by paying the bank for the delayed period.

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