4 Types of Cheque Clearances – Local, Outstation, HVC, Same Branch
Imagine a scenario wherein your home loan EMI (INR 20,000) date is after 2 days and you pay it via cheque. However you have insufficient funds in the account and are worried. Because cheque bounce means a penalty. So you ask your friend living in another city for monetary help and request him to deposit money in your account via cheque today; since he does not use online banking facility. So your friend who holds the account in the same bank as yours deposits the cheque within an hour.
Check out: Impact of cheque bounce on credit history
But will the money get credited into your account the same day?
How long does a cheque take to deposit?
The time taken in processing the cheque depends on the type of clearance i.e. –
- Local Clearing
- Outstation Clearing
- Same Branch Transfer
- High Value Clearing
Let’s look at these 4 types in detail
(1) Local Clearing
This happens when you deposit a cheque in the bank branch of the same city. It means there is a bank account in the same city.
Day 1: Depositor puts local cheque in your bank account.
Day 2: Your bank sends it to the clearing house of the Reserve Bank of India. A clearing house is an association of banks in which cheques of various banks of a city are cleared. In the clearing house, banks collect cheques, which are drawn from any of their branches. The headquarters of these banks send cheques to the concerned branches for clearing. It is also called the inward clearing cheque.
Day 3: Money comes into your account. If the bank money from the customer’s account is not successful in transferring it to your account (for any reason), the cheque then comes to the same bank which presented the cheque. (This is the bank in which you have an account.)
The cheque deposited in your account gets credited in 2-3 days.
(2) Outstation Clearing
It is clear from the name that you deposit a cheque which is from the bank branch of another city. There is only one difference compared to local clearance i.e it takes more time for the money to come into your account. The reason is that the physical cheque takes some time to move from one city to another.
Generally, outstation clearing takes 7-10 days. It depends on where the bank branch is.
(3) Transfer to same branch
It takes the shortest time. On the same day, money gets credited in your account.
(4) High Value Clearing
A cheque amounting to INR 1 lakh or more is called high-sum. Your local cheque in high value clearing (HVC) gets cleared on the same day. The money comes to your account the next morning.
For this, you should deposit the money before the cut-off time in the morning.
Important Note –
(1) Check your bank’s cheque collection policy. According to the Reserve Bank of India, all banks have to adhere to this policy. It should be seen by the customers what is the time required for the money to come into their account.
(2) Check outstation clearing and HVC charges applied by your bank. In case of outstation cheque, banks charge INR 15 to 500. It is levied according to the amount and location of the cheque. The Reserve Bank has given a proposal to cut these duties to benefit the customers. As far as HVC is concerned, the fee is between INR 20 to 50.
Hi, I am Nikesh Mehta owner and writer of this site.
I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business.