RBI orders same-day clearance of local cheques

03 June 2009

Partially addressing a long-standing grievance of bank customers, the Reserve Bank of India has finally directed that local cheques should be cleared on the same day or at most early next day of their presentation.

For outstation cheques, the time for clearance should not exceed seven days for state capitals, 10 days for major cities and 14 days for other locations, the RBI said in a notification.

The RBI said that if there is any delay beyond this period, the bank should pay interest as specified in its cheque collection policies. In case the rate is not specified in the policies, the applicable rate shall be the interest rate on fixed deposits for the corresponding maturity, the RBI said.

Each bank branch is to display the cheque collection policy prominently on its premises as well as the bank's website.

The move follows an August 2008 order by the National Consumer Disputes Redressal Commission (NCDRC) under the Consumer Protection Act, which had observed that by not speedily crediting the collection amount to bank accounts, the banks enjoyed a 'free float'.

''The timeframe for collection specified by the Commission (NCDRC) shall be treated as the outer limit and credit shall be afforded if the process gets completed earlier,'' RBI said. This is a volte face from its stance four years ago, when RBI had allowed banks to frame their own clearance policies.