Faster Cheques, Bigger UPI: RBI's Lightning-Fast Plan

Gone are the days when one put the cheque in the bank and waits for 2 working days for the amount to get credited in the bank account. In a move that will significantly benefit businesses and individuals alike, the Reserve Bank of India (RBI) today proposed measures to expedite cheque clearance to just a few hours. RBI Governor Shaktikanta Das revealed about the proposal this during the bi-monthly Monetary Policy Committee (MPC) meeting, highlighting the aim to streamline the process for enhanced efficiency and customer satisfaction.

Transforming Cheque Clearance: A New Era

At present, cheque clearing through Cheque Truncation System (CTS) operates in a batch processing mode and has a clearing cycle of up to two working days. It is proposed to reduce the clearing cycle by introducing continuous clearing with 'on-realisation-settlement’ in CTS. This means that cheques will be cleared within a few hours on the day of presentation. This will speed up cheque payments and benefit both the payer and the payee, said the apex bank chief.

Governor Das stated, "Cheques will be scanned, presented, and passed within a few hours on a continuous basis during business hours."

This transition from the current CTS, which processes cheques within up to two working days, marks a significant improvement. Detailed guidelines are expected soon, promising a reduction in the clearing cycle from T+1 days to mere hours.

This initiative is set to minimize settlement risks and improve the overall efficiency of cheque clearing, enhancing the experience for both businesses and individuals. "The objective of this measure is to enhance customer experience," emphasized Das. The RBI aims to shift CTS from batch processing to continuous clearing with "on-realisation-settlement."

Enhanced UPI Limits: A Step Forward

In addition to speeding up cheque clearance, the RBI has increased the limit for tax payments via the Unified Payments Interface (UPI) from Rs 1 lakh to Rs 5 lakh per transaction. This decision leverages UPI's vast user base of 424 million individuals, further expanding its potential.

"Currently, the transaction limit for UPI is Rs 1 lakh except for certain category of payments which have higher transaction limits. It has now been decided to enhance the limit for tax payments through UPI from Rs 1 lakh to Rs 5 lakh per transaction. This will further ease tax payments by consumers through UPI," said Dr Das.

Monetary Policy: Stability Amid Uncertainty

The MPC concluded its August policy meeting with a decision to keep the repo rate unchanged at 6.5%, maintaining a focus on the withdrawal of accommodation stance. The inflation forecast for FY25 remains steady at 4.5%, despite concerns over food prices and geopolitical tensions affecting crude prices.

The central bank projects inflation rates for Q2, Q3, and Q4 of FY25 at 4.4%, 4.7%, and 4.3%, respectively. This cautious outlook contrasts with the June policy projections, which were slightly lower.

Economic Growth: Sustained Optimism

On the growth front, the MPC continues to expect the Indian economy to expand by 7.2% in FY25. However, the outlook for Q1FY25 has been slightly moderated to 7.1%. The forecasts for the remaining quarters remain unchanged, reflecting sustained optimism despite global economic challenges.

MPC's Decision: Steady Rates and Withdrawal of Accommodation

The RBI's rate-setting panel decided to maintain the status quo on policy stance, marking the eighth consecutive time since the last hike in February 2023. Four out of six MPC members voted to keep the repo rate unchanged, while Jayanth Varma and Ashima Goyal advocated for a 25 basis point cut and a shift to a neutral stance.

The Standing Deposit Facility (SDF) rate remains steady at 6.25%, with the Marginal Standing Facility (MSF) rate and the Bank Rate both held at 6.75%. The committee reiterated its commitment to maintaining the inflation target at 4%.

 By expediting cheque clearance and increasing UPI limits, the RBI aims to foster a more efficient financial ecosystem, benefiting both businesses and individuals. As the central bank navigates inflationary pressures and global uncertainties, its steady approach to monetary policy underscores a commitment to sustained economic growth.

While concluding the speech, Dr Das said- "We recognise the challenges along the way, but we have to be patient to finish the job at hand. In the current context, the following words of Mahatma Gandhi are highly relevant: The slightest error of judgment, a hasty action or a hasty word may put back the hands of the clock of progress. Policies have, therefore, to be cautiously evolved…”

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