Grind onion, green chilli, ginger and garlic together in the small chutney jar of a grinder to make medium coarse paste. Grind the tomatoes to make tomato puree. Grind cashew nuts with 2 tablespoons water until smooth paste.
Heat 2 tablespoons oil in the same pan/kadai over medium flame. Add crushed onion paste (prepared in step-1) and salt (only for onion paste, it helps to cook onion faster). Sauté it until oil starts to separate or it turns translucent. It will take around 5-7 minutes.
Add tomato puree (prepared in step-1) and cook on medium flame until oil starts to separate, for approx. 5-6 minutes.
Add red chilli powder, turmeric powder, coriander powder, garam masala powder and salt.
Stir and cook for a minute. Add cashew nut paste (prepared in step-1).
Stir and cook for 1-2 minutes.
Add boiled peas and 1/2 cup water; mix properly and cook for 2-3 minutes.
Add paneer cubes and cook for 2-3 minutes. We have added plain paneer cubes but you can add shallow fried paneer to enhance the flavor
Turn off flame and transfer prepared curry to a serving bowl. Matar paneer is ready. Serve it with butter kulcha, cucumber tomato onion salad and gajar halwa for a complete meal.