Heat about 1 tbsp oil in a pan. When hot add the cubed onion and bell pepper. Fry for a few minutes, it should remain crisp and not become soft. Take them out and set them aside.
In the same pan add 1 tbsp oil, then add the onion masala, the spice powders, vinegar, sugar, salt, and a little water. Mix it all up and cover the pan. Let it come to a boil. Stir in between so it does not burn.
Blend the cashew nuts into a paste adding some water. Add this cashew paste to the masala, cook for about 5 minutes, adding a little water to thin it out.
Add the paneer along with the Kasuri methi and a sprinkle of garam masala powder. Mix it and cover the pan. Cook it for another 5 minutes on low flame.
Check for salt and add more if needed.
Add the previously fried onions and bell pepper to it, mix it and garnish with more Kasuri Methi or chopped cilantro.
Your paneer masala is ready! Enjoy with rice, Naan, or paratha.