The Reserve Bank of India (RBI) has postponed the Phase 2 implementation of Continuous Cheque Clearing. Earlier, it was decided to transition CTS to continuous clearing and settlement on realisation in two phases. Phase 1 was implemented on October 4, 2025 and Phase 2 was scheduled to be implemented on January 3, 2026. The clearing cycle was reduced from the present T+1 days to a few hours.
But now the implementation of Phase 2 has been postponed to allow more time for banks to streamline their operations.
But why RBI has postponed Phase 2?
The RBI introduced the system of continuous cheque clearing, but the move faced strong criticism. Under the new system, banks were required to clear cheques throughout the day instead of following the earlier practice of clearing cheques once a day. However, most banks were not prepared for this change due to a lack of adequate resources.
Banks did not have sufficient infrastructure, technology, or manpower to handle continuous cheque clearing. As a result, the system failed to work as expected. The RBI introduced the policy without properly assessing whether banks had the required capacity to implement it. Continuous cheque clearing requires additional staff and operational support, but banks are already facing a severe shortage of manpower. This policy further increased the operational burden on banks and added to existing challenges.
Apart from this there are several reasons for failure of Continuous Clearing
Apart from staff shortage and lack are several other practical reasons why RBI’s continuous cheque clearing policy failed:
- Increased Operational Burden
Continuous cheque clearing required banks to monitor clearing systems throughout the day. This significantly increased operational pressure on branch staff, who were already handling routine banking, customer service, and compliance work. - Technology Readiness Issues
Many branches, especially in semi-urban and rural areas, did not have upgraded IT systems or stable connectivity. Continuous processing demands high system uptime, which was not uniformly available across banks. - Mismatch with Cheque Usage Trends
Cheque usage has been declining due to digital payment modes like UPI, NEFT, and RTGS. Introducing a resource-intensive system for a declining payment instrument did not align with actual customer behaviour. - Inter-bank Coordination Challenges
Cheque clearing involves multiple banks. If even a few banks were not fully prepared, it disrupted the entire clearing cycle. Uneven readiness across banks led to delays and inefficiencies. - Higher Cost Without Proportionate Benefit
Continuous clearing increased costs related to staffing, overtime, system upgrades, and compliance. However, the benefits to customers were marginal compared to existing same-day or next-day clearing systems. - Risk Management and Error Handling
Faster and continuous processing reduced time for verification and checks. This increased the risk of operational errors, fraud, and disputes, especially in branches with limited trained staff. - Lack of Pilot Testing
The policy was implemented broadly without sufficient pilot testing in selected banks or regions. A phased or trial-based approach could have identified practical challenges in advance. - No Parallel Strengthening of Back-Office Functions
Clearing is not just a front-end activity. Reconciliation, returns, exception handling, and customer complaints also increased, but back-office teams were not strengthened accordingly. - Regulatory Overload on Banks
Banks were already dealing with multiple regulatory and compliance changes at the same time. Adding continuous cheque clearing further strained management and frontline staff. - Limited Customer Demand
Most customers were comfortable with once-a-day or same-day clearing. There was no strong demand from customers for continuous cheque clearing, making the policy unnecessary in practice.
The policy failed badly because it was introduced without adequate assessment of ground realities, did not match declining cheque usage, increased costs and workload, and ignored the existing manpower and infrastructure constraints faced by banks.