Bank Reconciliation › Cheque clearing

Cheque clearing and bounced cheques

How a cheque moves from your hand to the bank, the rules on validity and post-dated cheques, and the steps when one bounces.

How a cheque moves

1. Received: the receipt is saved with the payment mode cheque. The money is not in the bank yet.
2. Deposited: you give it to your bank. It is cleared through the Cheque Truncation System (CTS), using an image of the cheque instead of the paper.
3. Cleared: the amount reaches your account. Since 4 October 2025 CTS clears continuously during the day (RBI circular of 13 August 2025), so it is often the same working day; ask your bank for its timings.
4. Or bounced: the cheque comes back unpaid with a reason, for example "funds insufficient" or "signature differs".

In the Nivesh Sahayak App a cheque has a status: received, deposited, issued, cleared or bounced. Only cleared cheques are counted in the bank. When a reconciliation here finds a cheque in the bank statement, press Mark cleared and its status changes to cleared on the bank's date.

Rules worth knowing

• Validity: a cheque must be presented within three months of its date. After that the bank will not pay it; ask for a fresh cheque.
• Post-dated cheques cannot be deposited before the date written on them.
• Bounced cheque, Section 138 of the Negotiable Instruments Act, 1881: if a cheque given to pay a debt bounces, the payee can send a written demand notice within 30 days of learning about it. If the amount is not paid within 15 days of the notice, a complaint can be filed in court within one month after that. Keep the bank's return memo; talk to a lawyer for the exact steps.
• Return charges: banks charge both the drawer and the depositor for a returned cheque. Enter the charge as a bank expense.

When a cheque bounces

Mark the receipt as bounced in the Nivesh Sahayak App: it is left out of the books and the customer's bills become due again. Then add the return charge from the bank line here with Add as expense.