What does speed clearing of a cheque in India mean?

Speed clearing of a cheque is a mechanism that involves collection of an outstation cheque (a cheque drawn on non-local bank branch) through the local clearing. It facilitates collection of cheques drawn on outstation core-banking-enabled branches of banks, if they have a net-worked branch locally.

According to the RBI, until now, the collection of outstation cheques, required movement of cheques from the place of presentation (city where the cheque is presented) to drawee centre (city where the cheque is payable) which increased the realisation time for cheques. Speed clearing aims to cut the time which is normally taken for realisation of outstation cheques.

Process to be followed

A person who is in possession of an outstation cheque deposits it with his bank branch. This bank branch is called the presenting branch. The cheque is later sent for collection to the city where it is payable/drawn called destination centre or drawee centre.

The branch providing the collection service at the Destination centre is called the Collecting branch. On receipt of the cheque, the Collecting branch presents it in local clearing to the Drawee branch or the Destination branch. Once the cheque is paid the Collecting branch remits the proceeds to the Presenting branch. On receipt of realisation advice of the cheque from the Collecting branch, the customer's account is credited. This, in short, is the process of Collection. When a cheque is accepted on a collection basis by a bank, it credits the customer's account only after realisation of its proceeds.

Alternatively, in the absence of a collection arrangement at the Destination centre, the Presenting branch will send the cheque directly to the Destination branch for payment. On receiving the proceeds from Destination branch, Presenting branch credits the customer's account.

How long does it take?

Generally, it takes around a week to three weeks time depending on the drawee centre and collection arrangements to get outstation cheques realised on a Collection basis.

Information Courtesy: Reserve Bank of India