What changed
RBI observed that some co-operative banks had bilateral agreements to clear post-dated cheques directly with other banks, bypassing the Clearing House. After review, RBI concluded these parallel arrangements undermine the clearing system, increase costs, and violate the Payment and Settlement Systems Act, 2007. The circular explicitly bans such arrangements, including correspondent banking and cash management service deals that involve routine cheque clearing outside the Clearing House.
What it means for you
Co-operative banks must now route all cheque clearing through the official Clearing House infrastructure, ending any side deals for direct settlement. This ensures uniform standards, reduces systemic risk, and brings all inter-bank clearing under RBI's regulatory oversight. Banks that continue bilateral arrangements face strict penal action under the Act.
What you must do
- Immediately identify and terminate all bilateral clearing agreements with other banks for processing cheques outside the Clearing House.
- Review and discontinue any correspondent banking or cash management arrangements that involve routine cheque clearing bypassing the Clearing House.
- Confirm compliance to your respective RBI Regional Office, acknowledging receipt of this circular.
- Ensure all future cheque clearing is routed through the official Clearing House infrastructure only.
Who it affects
All State Co-operative Banks, All Central Co-operative Banks, Banks with bilateral clearing arrangements for post-dated cheques, Banks using correspondent banking or cash management services for cheque clearing
Does this ban affect ATM sharing or ECS products?
The circular clarifies that bilateral agreements include those for sharing ATMs or using electronic clearing products like ECS, and such arrangements also require RBI authorisation under the Payment and Settlement Systems Act. The circular advises discontinuation of all bilateral clearing arrangements arising out of normal banking transactions.