Dispelling fears about the seemingly difficult encashment of the "registered warrants" - IOUs - issued by California State to government vendors and taxpayers, banks and local credit unions have announced their decision to honor the warrants.

While Bank of America made the 'full redemption of IOUs' announcement late Wednesday, the other leading banks - including Chase, Wells Fargo & Co. and Union Bank - followed up the move on Thursday.

However, the banks added that they would cash the state-issued, interest-bearing IOUs only till July 10, thereby giving the California state authorities some more time to resolve its budget quandary.

The printing of IOUs commenced Thursday afternoon, after Gov. Arnold Schwarzenegger and state law-makers failed to reach a consensus regarding the $24 billion budget deficit, before beginning the current fiscal on July 1.

Meanwhile, the California Credit Union League said that some banks - like the City National - have not set a time limit for accepting the IOUs from customers; and that quite a few credit unions also have agreed to honor the IOUs without mentioning a deadline.

Talking about the decision to accept the IOUs, Jay Hufford - VP of members' services for Community First Credit Union - said: "We're not going to put a 10-day limit on it. It will be like cash in the vault and then on Oct. 2 we'll present them to the state controller's office."