Cheque clearing is the process of moving funds from one account to another. To make this easier to understand, let’s think about a regular banking transaction, such as depositing checks.

The clearing process begins with the deposit of a cheque in a bank. The cheque (along with other cheques) is delivered to the bank/branch where it is drawn. The cheque is passed for payment if the funds are available and the banker is satisfied about the genuineness of the instrument.

The cheques that are unpaid are returned to the presenting bank through another clearing called the Return Clearing. The realization of the funds occurs after the completion of return clearing and by the absence of an unpaid cheque.