RBI Advises Banks to Review Percentage-Based Cheque Collection Charges
Current · Source: Reserve Bank of India · RBI/2011-12/560 · issued 11 May 2012 · ~2 min read
Quick answerRBI has advised banks that currently levy collection charges as a percentage of cheque value for outstation and speed clearing above ₹1 lakh to review and fix charges on a cost-plus basis. Banks violating earlier instructions under Section 18 of PSS Act are directed to comply.
The rule, in the simplest words
Banks cannot charge a percentage of the cheque's value for collecting cheques over ₹1 lakh (1,00,000 rupees) that are from another city or cleared quickly through speed clearing.
Instead, banks must set the fee based on what it actually costs them to process the cheque, plus a small fair profit (called cost-plus basis).
Speed clearing charges must be lower than outstation (another city) charges for cheques over ₹1 lakh.
Banks must update their Cheque Collection Policy (CCP - the bank's rulebook for cheque fees) with the new fees, tell customers, and put the fees on their website.
Banks that broke the earlier rule by charging a percentage must fix it now and send proof to RBI.
How it plays out — a real example
A payments & clearing officer in Indore notices her bank still charges 0.5% of the cheque value for outstation cheques over ₹1 lakh. She remembers the RBI's new advice and tells her manager they must switch to a cost-plus fee, like a flat ₹50 per cheque, to follow the rule and protect customers from high charges.
What changed
Earlier, banks were free to set collection charges for cheques above ₹1 lakh under speed clearing and outstation clearing, provided they were fair and cost-plus. Now, RBI has advised banks that have fixed charges as a percentage to review and fix them on a cost-plus basis after finding violations.
What it means for you
Banks can no longer link collection fees to cheque amounts, which often inflated costs for high-value instruments. This protects customers from arbitrary charges and aligns with fair pricing norms. Lenders must rework their fee structures and update their Cheque Collection Policies accordingly.
What you must do
If your bank currently charges a percentage of cheque value for outstation and speed clearing above ₹1 lakh, review and fix charges on a cost-plus basis.
Ensure speed clearing charges are lower than outstation charges.
Update your Cheque Collection Policy (CCP) with the revised service charge structure.
Notify customers about the updated charges and display them on your bank's website.
Submit a copy of the revised charges to RBI and confirm compliance.
Who it affects
All Scheduled Commercial Banks including RRBs, Urban Co-operative Banks (UCBs), State Co-operative Banks, District Central Co-operative Banks, Local Area Banks
❓ Common questions
What is the key change in this circular?
RBI has advised banks that currently charge collection fees as a percentage of the cheque value for outstation and speed clearing of instruments above ₹1 lakh to review and fix charges on a cost-plus basis.
Why did RBI issue this directive?
Instances of banks levying arbitrary percentage-based charges, violating earlier instructions, were reported. Such practices contravene instructions issued under Section 18 of the Payment and Settlement Systems Act, 2007.
What should banks do to comply?
Banks that charge percentage-based fees must review their fee structure, fix charges on a cost-plus basis, ensure speed clearing charges are lower than outstation charges, update their Cheque Collection Policy, notify customers, and submit the revised structure to RBI.
📜 Read the original circular — full text as issued by RBI
RBI/2011-12/560
DPSS.CO.CHD.No. / 2080 / 03.01.03 / 2011-12
May 11, 2012
The Chairman and Managing Director / Chief Executive Officer
All Scheduled Commercial Banks including RRBs / UCBs /
State Co-operative Banks / District Central Co-operative Banks/Local Area Banks
Madam / Dear Sir,
Review of Service Charges for Cheque Collection –
Outstation and Speed Clearing
Please refer to our circulars DPSS.CO.No.611 / 03.01.03(P) / 2008-09 dated October 8, 2008 and DPSS.CO.No 829 / 03.01.03(SC) / 2008-09 dated November 17, 2008 in terms of which, the charges for Outstation Cheque Collection and cheques collected under the Speed Clearing arrangement (leveraging the CBS platform) were mandated by the Reserve Bank of India.
2. In terms of our circular DPSS.CO.CHD.No. 1671 / 03.06.01 / 2010-11 dated January 19, 2011 , freedom was accorded to banks to determine collection charges for cheques valuing above Rs. 1 lakh cleared through Speed Clearing and Outstation Cheque Clearing mechanism subject to such charges being levied in a fair and transparent manner. The term fair and transparent manner, inter-alia , included fixing the service charges on a cost-plus basis and not on the basis of an arbitrary percentage to the value of the instrument as advised in paragraph 6(b) of the said circular.
3. However, instances of banks levying charges as an arbitrary percentage to the value of the instrument, contrary to the instructions issued in the circular have been brought to our notice. Such practices are in violation of instructions issued under Section 18 of the Payment and Settlement Systems Act 2007.
4. Banks, which have fixed their service charges for out-station/speed clearing for instruments valuing above Rs. 1 lakh as percentage to the value of instruments are, therefore, advised to review the same and fix the charges on a cost-plus basis.
5. Banks may note to ensure that collection charges fixed for instruments valuing above Rs. 1 lakh is lower under Speed Clearing vis-a-vis Out-station Cheque Collection as advised in paragraph 6(d) of our circular dated January 19, 2011 so as to encourage the use of Speed Clearing.
6. The updated service charge structure may be incorporated in the Cheque Collection Policy (CCP) and customers notified accordingly. The revised rates may also be placed on the bank's web site and a copy thereof may be submitted to us..
7. Please acknowledge receipt and confirm compliance.
Yours faithfully
(Vijay Chugh)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/560 · issued 11 May 2012. The plain-English explanation above is BankPulse’s own independent summary.
If your bank currently charges a percentage of cheque value for outstation and speed clearing above ₹1 lakh, review and fix charges on a cost-plus basis.
Ensure speed clearing charges are lower than outstation charges.
📜 Compliance
Update your Cheque Collection Policy (CCP) with the revised service charge structure.
Notify customers about the updated charges and display them on your bank's website.
Submit a copy of the revised charges to RBI and confirm compliance.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an Operations officer at a bank this circular applies to (All Scheduled Commercial Banks including RRBs, Urban Co-operative Banks (UCBs), State Co-operative Banks, District Central Co-operative Banks, Local Area Banks), your first concrete step on “RBI Advises Banks to Review Percentage-Based Cheque Collection Charges” is: “If your bank currently charges a percentage of cheque value for outstation and speed clearing above ₹1 lakh, review and fix charges on a cost-plus basis.” (RBI issued this 11 May 2012).
Action required: If your bank currently charges a percentage of cheque value for outstation and speed clearing above ₹1 lakh, review and fix charges on a cost-plus basis.
Action required: Ensure speed clearing charges are lower than outstation charges.
Action required: Update your Cheque Collection Policy (CCP) with the revised service charge structure.
Action required: Notify customers about the updated charges and display them on your bank's website.
Action required: Submit a copy of the revised charges to RBI and confirm compliance.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7209&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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