Cheque Clearing Time, Process, LC Explained

Cheques are prominent instruments in our daily economic transactions. Once you deposit a cheque in your bank, the first question comes to your mind is ‘How long it will take to clear cheque?’ the second question probably be ‘What is normal cheque clearing time?’. You get different answers from your banker, which makes it even confusing to understand the process. So, we decided to simplify the cheque clearing process for you. After finishing reading this article you will be able to understand: types of cheques, process of cheque clearing and time taken for cheque clearing.

Table of Contents
What is Local Clearing
How long does it take to clear local cheque?
What is outstation clearing?
How Long does it take to clear Outstation Cheques?
Foreign currency cheque clearing time
What could be reasons for delay in cheque clearing?

What is Local Clearing

Below we have mentioned simplified process of cheque clearing. It is not the exact process, but in order to understand it better, we will take an example.

Suppose you received cheque from Axis bank account holder.

You received a cheque with your name on it from another person. If it is crossed cheque, then you must have to submit it to the bank where you hold an account.

But you have account in HDFC bank.

So you will take this cheque to your HDFC bank branch and fill up the deposit slip. Attach the deposit slip with cheque & put it into ‘cheque dropbox’ or submit the cheque at the counter.

Your bank will then collect your cheque from the box and send it for clearing to the Axis bank.

Now Axis bank will validate the cheque along with signature and if everything is correct, bank will debit funds from drawer’s account and send it to your bank.

Your bank i.e., HDFC bank will confirm the received fund and credit same to your account. Your bank may charge you standard service charges for cheque clearing. This is simple explantion of process of cheque clearing.

How long does it take to clear Local cheque?

In cities where cheque clearing center is not available, banks directly trade cheques with each other for clearing purposes.

However the standard time for clearing cheque locally in the city where there is no clearing center available could be same day or up to 3 working days.

Read Also: HDFC RTGS/NEFT Form & cheque filling

The time for cheque clearing in India might differ. CTS machines now allow the banks faster way to clear cheques within a day. Even though it is recommended that local clearing should be done on the same day. Banks take up to 3-7 working days of time for local clearing of cheque.

What is outstation clearing?

Suppose you received a cheque, which is of Axis Bank. But you belong to a small town and your town doesn’t have a branch of Axis Bank, then clearing of such cheque will be categorized under outstation clearing.

How long does it take to clear Outstation cheque

As the given bank branch doesn’t exist in your account, outstation clearing can take longer time to clearing. Usually this timeframe depends upon individual bank. Most of the public sector banks in India will clear outstation cheque within 7 to 21 days.

Another type of cheque is foreign currency cheque. These cheques are issued in your name and need to be cleared at the issuing bank’s clearing house available.

How much time it takes for clearing foreign currency cheques

As this kind of clearing process involves foreign exchange, it takes longer time than usual to clear foreign currency cheque. If you have received a cheque in foreign currency, then it probably is going to take longer than usual time which is up to 45 working days.

Normally foreign currency cheques are valid for 6 months from the date of issue mentioned on the cheque.

What could be reasons for delay of cheque clearing?

Even though standard prescribed time for cheque clearing is shorter, sometimes it might take even longer to clear your cheques. There are some unavoidable circumstances that banks may face due to which the cheque clearing time gets delayed. Here are few of such reasons

1. There are back to back public holidays

You might have dropped your cheque during odd time of festivals. The standard cheque clearing time is counted for bank’s working days only. So you will have to wait till, festival period is over.

2. Absence of staff

Even though you have submitted cheque to your bank, the staff who handles clearing department might be on leave. Unless the staff resumes his duty or branch manager assigns someone else for the same, your cheque will not go for clearing.

3. Bank lost your cheque

This is case of mishandling. Bank is very much responsible that they handle your instruments carefully. However, human errors may occur at times. So if you find that your payment is getting delayed for longer than standard time, then you should immediately visit your bank and inquire regarding status of your cheque.

4. Improper filled cheque/ Wrong details mentioned

If the drawer of the cheque (the person who wrote you cheque) has wrongly filled cheque or signature is found to be wrong. Then such cheque will be returned. In such case, both the drawer and drawee are going to get charged.

So now you are well equipped with the knowledge of cheque clearing time, process of cheque clearing and all the other details regarding the process, so don’t forget to share this with others. Also we would love to hear from you in the comment box below.