Positive Pay System (PPS) is a cheque-fraud control used with India's Cheque Truncation System (CTS). The person who issues a high-value cheque reconfirms its key details electronically with the drawee bank, and those details are matched against the cheque image when it is presented for clearing. With CTS now clearing cheques continuously through the day, a mismatch has to be caught within hours, not the next morning. This guide explains how CTS and PPS work together, the Rs 50,000 and Rs 5 lakh levels, what changed with continuous clearing, and how a finance team should build PPS into its payment process, with worked examples.
How CTS clears a cheque
The RBI's FAQs on Cheque Clearing describe cheque truncation as stopping the flow of the physical cheque during the clearing cycle as soon as an electronic image is generated. The presenting bank sends the image and data; the physical cheque stays with it. CTS started with three grids: Delhi from 1 February 2008, Chennai from 24 September 2011 and Mumbai from 27 April 2013. From 13 October 2023 the three grids were merged into a single National Grid managed by the National Grid Clearing House, Chennai.
Two rules from the same FAQs matter for anyone writing cheques:
- Only CTS-2010 standard cheques can be presented through CTS. Non-CTS cheques could not be presented after 31 December 2018.
- Cheques with alterations or modifications are not accepted under CTS, other than date validation. Use image-friendly permanent ink. If the payee name or amount has to change, write a fresh cheque.
Continuous clearing and settlement on realisation
Through RBI circular RBI/2025-26/73 dated 13 August 2025, CTS moved from batch clearing to continuous clearing and settlement on realisation. Phase 1 began on 4 October 2025. Its main features:
| Feature | Phase 1 rule |
|---|---|
| Presentation session | 10:00 AM to 4:00 PM, with banks sending scanned cheques continuously |
| Confirmation session | 10:00 AM to 7:00 PM for drawee banks to confirm or return each cheque |
| Item expiry time | 7:00 PM, the end of the confirmation session |
| No response from drawee bank | Cheque is deemed approved and included for settlement |
| Settlement | Every hour, starting from 11:00 AM |
| Credit to the payee | Immediately, but not later than 1 hour from successful settlement |
The circular also scheduled a Phase 2 from 3 January 2026, in which each cheque would expire T+3 clear hours after receipt (a cheque received between 10 and 11 AM would need confirmation by 2 PM). Check the RBI's current notifications for the status of Phase 2 before relying on those timings.
The deemed-approval rule is the reason PPS matters more now. A drawee bank that does not act on an item before expiry lets it through. A PPS mismatch flag gives the bank a clear, early reason to hold or return a suspicious cheque within the window.
What the RBI requires on Positive Pay
PPS was introduced by RBI circular RBI/2020-21/41 DPSS.CO.RPPD.No.309/04.07.005/2020-21 dated 25 September 2020, addressed to all banks and to NPCI. Its main points:
- The issuer submits minimum details of the cheque, such as date, beneficiary or payee name and amount, through electronic channels such as SMS, mobile app, internet banking or ATM.
- These details are cross-checked with the cheque presented through CTS, and any discrepancy is flagged to the drawee and presenting banks for redressal.
- NPCI develops the PPS facility in CTS and makes it available to participant banks.
- Banks must enable PPS for all account holders issuing cheques of Rs 50,000 and above. Using it is at the account holder's discretion, but banks may consider making it mandatory for cheques of Rs 5,00,000 and above.
- Only cheques that comply with these instructions are accepted under the dispute resolution mechanism at the CTS grids.
- The arrangement took effect from 1 January 2021, and banks are to extend similar arrangements to cheques cleared outside CTS.
The dispute point is easy to miss. If a high-value cheque is fraudulently altered and the drawer did not use PPS, the cheque falls outside the CTS dispute resolution mechanism. For a business, that alone justifies making PPS standard practice above Rs 50,000.
Rs 50,000 and Rs 5 lakh: how the two levels work
| Cheque amount | Bank's obligation | Customer position |
|---|---|---|
| Below Rs 50,000 | No RBI requirement to offer PPS | Normal cheque controls apply |
| Rs 50,000 to below Rs 5,00,000 | Must enable PPS | Optional, but needed for the CTS dispute mechanism |
| Rs 5,00,000 and above | Must enable PPS; may make it mandatory | Check whether your bank has made it mandatory |
Banks set their own customer-side rules within this framework, so confirm your bank's current policy, channels and cut-off for PPS submission.
Worked examples
Example 1: one vendor cheque of Rs 8 lakh
A company issues a cheque of Rs 8,00,000 to a supplier. After the cheque is signed, an authorised user submits the cheque number, date, payee name and amount through the bank's PPS channel. The supplier deposits it and it is presented at 11:15 AM. The drawee bank matches the image against the PPS record, finds no mismatch and confirms at 1:40 PM. The cheque goes into the 2:00 PM settlement, and the supplier's bank must credit the supplier by 3:00 PM at the latest. Because the amount is above Rs 5,00,000, the bank may have made PPS mandatory; without the PPS entry, it could return the cheque.
If instead the payee name had been altered after issue, the PPS mismatch would be flagged when the cheque was presented, giving the drawee bank a basis to return it within the confirmation window rather than letting it be deemed approved.
Example 2: a monthly cheque run
A trading firm issues ten cheques in a month: Rs 38,000, Rs 52,000, Rs 1,25,000, Rs 4,80,000, Rs 5,00,000, Rs 7,60,000, Rs 12,50,000, Rs 24,000, Rs 95,000 and Rs 49,999. They total Rs 33,73,999.
- Seven cheques, worth Rs 32,62,000, are Rs 50,000 or more and eligible for PPS. That is 96.7% of the value paid by cheque.
- Three cheques, worth Rs 25,10,000, are Rs 5,00,000 or more, where the bank may insist on PPS.
- The Rs 49,999 cheque is just below the PPS level. A cheque cut just under Rs 50,000 is a red flag worth reviewing in the payment approval, especially if a vendor receives several in a short period.
The finance team's rule can be simple: every cheque of Rs 50,000 or more goes through PPS before it leaves the office, and the PPS acknowledgement is attached to the payment voucher.
Building PPS into the payment process
PPS is a bank-side check on selected cheque particulars. Internal controls such as invoice approval, beneficiary validation and authorised signatures work before the cheque leaves the company. The two work best together.
- Confirm your bank's PPS rules: whether it is mandatory above Rs 5,00,000, which channels are supported, and by when details must be submitted.
- Submit only final details: approve and sign the cheque first, then transmit the matching PPS particulars.
- Separate maker and checker: the person who writes the cheque should not be the only person who submits PPS details for material payments.
- Match the payee name exactly to the cheque and the approved vendor master.
- Retain evidence: keep the PPS acknowledgement with the voucher and cheque register.
- Never alter a cheque: cancel it and issue a fresh one.
- Watch the clearing window: with hourly settlement and deemed approval, respond at once if the bank calls about a mismatch.
- Review returns and mismatch alerts before reissuing any payment.
Updated on 27 September 2026: merged the CTS working guide into this page, added the National Grid, CTS-2010 and alteration rules, continuous clearing under RBI circular RBI/2025-26/73, the PPS dispute-resolution condition and circular reference, and two worked examples.
