If the paneer is packaged, soak the cubes in warm water for 15 to 20 minutes. Drain and pat dry. Set aside 1/4 cup for the blender.
Char the peppers on a gas flame, turning with tongs, until the skin blisters and the flesh softens, 8 to 10 minutes. Or broil or air-fry as in the post.
Cover the hot peppers 5 minutes. Peel, seed, and discard the ribs. You should have about 1 1/2 cups bright red flesh.
Make the paste
Blend the peeled peppers, garlic, 1/4 cup paneer, yogurt, Kashmiri chili, and 1/4 cup water until completely smooth. The paste should look deep orange-red and pour like a thick chutney. If it is chunky, blend another 20 seconds.
Optional paneer sear
Heat 1 teaspoon ghee in the kadhai over medium-high. Sear the remaining paneer 1 to 2 minutes until the edges take a little color. Lift out and set aside. Skip this if you want the cubes fully soft.
Cook the gravy
Heat 1 tablespoon ghee or butter in the same pan over medium. Add the cumin and let it smell fragrant, about 15 seconds.
Add the pepper paste. Cook 6 to 8 minutes, stirring, until a few oil specks show at the edges and the color deepens. If it sticks, splash in a tablespoon of water. Do not rush this. Raw paste tastes like cold pepper dip.
Add 1/2 cup hot water. I swirl that water in the blender jar first so no paste is wasted. Simmer 2 to 3 minutes until the gravy coats a spoon. Add the remaining 1/4 cup water if it looks tight.
Stir in the optional cream. Add the paneer. Simmer 2 to 3 minutes on low, just until the cubes are hot. Do not boil hard or the paneer tightens.
Taste. Add a pinch of salt if the peppers taste shy. The gravy should be smoky and a little sweet, not sour.
Serve
Spoon into a warm bowl. Scatter cilantro and a pinch of kasuri methi, or swirl a little cream. Serve hot.
Notes
Peel until the flesh is bright red. Leftover black skin turns the gravy khaki and ashy.Jarred peppers: 1 1/2 cups, drained and patted dry. Add 1/4 teaspoon smoked paprika if the jar tastes flat.Full-fat yogurt only. Low-fat makes a thin, sharp paste.Do not add extra water in the blender unless the blades stall. A watery paste never releases fat.For a Jain plate, skip the garlic. Bloom a pinch of hing with the cumin, then add the paste.Vegan: extra-firm tofu in place of both the cubes and the blended paneer. Use unsweetened plain plant yogurt, and blend 8 soaked cashews with the peppers if you want the same silk.Green peppers do not work as the only pepper. They stay grassy.Gravy keeps 3 days in the fridge without paneer. Add fresh cubes when you reheat. I do not freeze this one. The yogurt splits when it thaws.