RBI mandates compensation for delayed local cheque clearance
Current · Source: Reserve Bank of India · RBI/2012-13/165 · issued 13 Aug 2012 · ~2 min read
Quick answerRBI now requires banks to include compensation for delayed clearance of local cheques in their Cheque Collection Policy, with a default rate of savings bank interest if no rate is specified. This addresses the gap where local cheques were often not covered for compensation.
The rule, in the simplest words
Banks must include compensation for delayed local cheque clearance in their Cheque Collection Policy.
If no rate is specified, banks must pay savings bank interest rate for the delay period.
Banks must give publicity to their revised Cheque Collection Policy through display boards and their website.
How it plays out — a real example
As a payments & clearing officer in Indore, I recently had a customer whose local cheque was delayed for a week. According to our revised Cheque Collection Policy, we had to pay the customer savings bank interest rate for the delay period. This ensured that our customer received fair compensation for the delayed credit, enhancing their trust in our bank's services.
What changed
Previously, banks' Cheque Collection Policies (CCPs) did not mention compensation for delays in local cheque realisation, leading to customer grievances. Now, RBI advises banks to reframe their CCPs to include compensation for local cheques as well, with a default rate of savings bank interest if no rate is specified. The existing rules for outstation cheques remain unchanged.
What it means for you
Banks must update their CCPs to explicitly state compensation for local cheque delays, ensuring customers are compensated if credit is delayed beyond the timeline. This increases operational costs for banks that delay local cheque processing, as they must pay interest at savings bank rate. It also enhances customer service and transparency, reducing complaints.
What you must do
Revise your Cheque Collection Policy to include compensation terms for local cheque delays.
Set a clear compensation rate; if not specified, default to savings bank interest rate for the delay period.
Give publicity to the revised CCP through display boards in branches and on your website for better customer service and dissemination of information.
Forward a copy of the revised CCP to RBI.
Who it affects
All Scheduled Commercial Banks including RRBs, Urban Co-operative Banks, State Co-operative Banks, District Central Co-operative Banks
❓ Common questions
What is the default compensation rate for delayed local cheques if my bank's policy doesn't specify one?
If your bank's Cheque Collection Policy does not mention a specific rate, compensation must be paid at the savings bank interest rate for the period of delay.
Does this circular change anything for outstation cheque clearance?
No, the instructions for outstation cheques remain unchanged as per the earlier circular of November 24, 2008.
How should banks publicize the revised Cheque Collection Policy?
Banks must display the revised policy on branch notice boards and their website to ensure better customer service and information dissemination.
📜 Read the original circular — full text as issued by RBI
RBI/2012-13/165
DPSS.CO.CHD.No.284/03.06.03/2012-13
August 13, 2012
The Chairman and Managing Director / Chief Executive Officer
All Scheduled Commercial Banks including RRBs /
Urban Co-operative Banks / State Co-operative Banks /
District Central Co-operative Banks
Madam / Dear Sir
Stipulation of compensation for delay in Clearance of Local Cheques
As you may be aware, banks are required to specify the time line for realisation of local and outstation cheques in their Cheque Collection Policies (CCP) including the compensation payable for delayed credit, if any. However, on perusal of the Cheque Collection Policies (CCPs) and Compensation Policies of various banks, it is observed that there is no mention about the compensation in respect of the delay in realisation of local cheques. Instances of delayed credit to customers' accounts without any compensation for the delayed period beyond the time line indicated in the CCPs, in respect of local cheques, have been brought to our notice.
2. In this regard, a reference is invited to our circular DPSS. CO. (CHD) No. 873/03.09.01/2008-09 dated November 24, 2008, in terms of which, banks are required to specify the time line for realisation of cheques, including local cheques, in their respective CCPs. Paragraph 4(ii) of the circular also states that in case of local cheques, banks shall permit usage of the shadow credit afforded to the customers' account immediately after closure of relative return clearing and in any case, withdrawal shall be allowed on the same day or maximum within an hour of the commencement of business on the next working day, subject to usual safeguards.
3. In view of the above, banks are advised to reframe their CCPs to include compensation payable for the delayed period in the case of collection of local cheques as well. In case, no rate is specified in the CCP for delay in realisation of local cheques, compensation at savings bank interest rate shall be paid for the corresponding period of delay.
4. As regards the realization period and compensation for delayed credit pertaining to outstation cheques, the instructions contained in paragraph 4(iii) of our circular dated November 24, 2008 remain unchanged.
5. Banks may note to give publicity to their revised CCPs through display board in branches and on their website for better customer service and dissemination of information. A copy of revised CCPs formulated may also be forwarded to us.
6. The above instructions are issued under Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007).
7. Please acknowledge receipt and ensure compliance.
Yours faithfully,
(Vijay Chugh)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2012-13/165 · issued 13 Aug 2012. The plain-English explanation above is BankPulse’s own independent summary.
Give publicity to the revised CCP through display boards in branches and on your website for better customer service and dissemination of information.
📜 Compliance
Revise your Cheque Collection Policy to include compensation terms for local cheque delays.
Set a clear compensation rate; if not specified, default to savings bank interest rate for the delay period.
Forward a copy of the revised CCP to RBI.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (All Scheduled Commercial Banks including RRBs, Urban Co-operative Banks, State Co-operative Banks, District Central Co-operative Banks), your first concrete step on “RBI mandates compensation for delayed local cheque clearance” is: “Revise your Cheque Collection Policy to include compensation terms for local cheque delays.” (RBI issued this 13 Aug 2012).
Circular: RBI/2012-13/165 -- RBI mandates compensation for delayed local cheque clearance
Issued: 13 Aug 2012
Action required: Revise your Cheque Collection Policy to include compensation terms for local cheque delays.
Action required: Set a clear compensation rate; if not specified, default to savings bank interest rate for the delay period.
Action required: Give publicity to the revised CCP through display boards in branches and on your website for better customer service and dissemination of information.
Action required: Forward a copy of the revised CCP to RBI.
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=7502&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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