New Delhi (ABC Live): The Reserve Bank of India has postponed Phase-2 of Clearing and Settlement on Realisation (SoR) under the Cheque Truncation System (CTS).
However, this move does not roll back reform. Instead, it shows a careful pause to fix risks before tightening timelines.

Notably, the RBI announced this decision on December 24, 2025. At the same time, it also changed daily CTS timings to reduce pressure on banks.
Official RBI notification:
https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13232&Mode=0

To understand the pause clearly, three points matter.
First, what Phase-1 changed.
Second, why does Phase-2 raise risk?
Third, why cheques still matter in law, even in a digital age.

What Is Clearing and Settlement on Realisation (SoR) in CTS: Phase-1

Earlier system vs Phase-1 reform

Earlier, CTS worked on the settlement on presentation. In other words, banks settled cheques first and checked them later.
As a result, when a cheque bounced, banks had to reverse entries. Consequently, liquidity became unclear and disputes increased.

Phase-1 changed this order.

Under Settlement on Realisation (SoR):

• Banks settle only after confirmation.

• Returned cheques never settle.

• Therefore, system-level reversals disappear.

Simply put, checking now comes before money moves.

How CTS Phase-1 Works (Simple Flow)

First, the customer deposits a cheque.
Next, the presenting bank scans and uploads the image and MICR data.
Then, the drawee bank checks funds, signature, mandate, stop-payment, and legal blocks.
After that, the bank either honours or returns the cheque.
Finally, only honoured cheques are settled at the RBI.

Importantly, if the drawee bank does not act by 7:00 PM, the cheque is deemed confirmed. This rule prevents the system from getting stuck.

Why Phase-1 Was a Major Upgrade

Phase-1 improved CTS in four ways.

First, it reduced settlement risk.
Second, it cleaned inter-bank accounts.
Third, it improved liquidity planning.
Finally, it strengthened legal clarity because CTS return memos are time-stamped digital proof.

At the same time, Phase-1 also revealed stress. In particular, banks faced pressure in exception handling and intraday liquidity. Therefore, RBI reviewed Phase-2 more carefully.

What Phase-2 Was Meant to Do

Phase-2 aimed to make clearing even faster.
Instead of waiting until the end of the day, each cheque would expire after T+3 clear hours.

As a result, if a bank failed to act in time, the cheque would be deemed approved.
Therefore, the delay itself would decide the settlement.

This single change explains why Phase-2 is riskier.

Phase-1 vs Phase-2: Risk-Impact Table

Clearly, without stable Phase-1 operations, Phase-2 would turn small delays into outcomes.

Why RBI postpone CTS Phase-2

First, readiness is uneven. Many banks still struggle with signature checks and exception queues.
Second, continuous settlement increases intraday liquidity pressure. Not all treasuries are ready.
Third, cheque clearing remains legally sensitive, especially for MSMEs and cheque-bounce cases.

Therefore, the RBI chose stability before speed.

RBI’s Recalibration: Revised CTS Timings

By starting earlier, RBI spreads workload across the day. As a result, late-day risk falls.

Data: CTS Volumes and Return Ratios

CTS Clearing Scale (Indicative)

CTS Return Profile

Thus, even small error rates matter at scale.

Legal Explainer: Phase-1 SoR and NI Act Timelines

SoR does not change Section 138 of the Negotiable Instruments Act.
However, it sharpens evidence.

Under Phase-1:

1. CTS image is uploaded.
2. Return memo is generated digitally.
3. Timestamp becomes the dishonour date.
4. The 30-day notice period begins.

As a result, arguments about reversal timing lose strength.

For deeper legal guidance, see ABC Live’s explainer on SANJABIJ/TARI cheque-bounce rules:
https://abclive.in/2025/10/05/sanjabij-tari-cheque-bounce-guidelines/

Bank-Facing Compliance SOP (Phase-1 SoR)

Front-end

• Enforce 09:00–03:00 cut-off.

• Clearly say: credit subject to realisation.

Drawee bank

• Staff teams from 09:00–07:00.

• Check every item without delay.

Exceptions

• Keep an internal cut-off before 7:00 PM.

• Track near-expiry items daily.

Treasury

• Avoid provisional assumptions.

• Stress-test for peak return days.

ABC Live Editorial Note

RBI’s pause is caution, not fear.
Because CTS handles over 600 million cheques a year, even small mistakes can create large legal and financial trouble. Phase-1 fixed the direction. Phase-2 must wait until execution is strong everywhere.

In short, slow and correct is safer than fast and wrong.

— ABC Live