RBI issues fresh guidelines to deal with bounced cheques
November 12, 2009
To enforce financial discipline among bank customers, the Reserve Bank of India (RBI) has asked all commercial banks to take certain steps while dealing with incidents of frequent dishonour of cheques.
The central bank said that banks should introduce a fresh condition for operation of accounts with cheque facility. In the event of dishonour of a cheque valued at Rs 1 crore and above drawn on a particular account of a drawer on four occasions during the financial year for want of sufficient funds in the account, no fresh cheque book would be issued. Also, the bank may consider closing a current account at its discretion.
However, in respect of advances accounts such as cash credit account and overdraft account, the need for continuance or otherwise of these credit facilities and the cheque facility relating to these accounts should be reviewed by an appropriate authority higher than the sanctioning authority, the RBI said.
The central bank has also proposed to amend Section 138 of the Negotiable Instruments (NI) Act 1881, to allow banks to make part-payment of cheques, in case of insufficient funds in that particular account.
Banks are required to follow the 1990’s Goiporia Committee recommendation which says that dishonoured instruments (cheques) are to be returned to the customer within 24 hours.
According to a Law Commission report dated November 2008, there were over 38 lakh pending cases related to dishonoured cheques in various courts across the country. Delhi was leading with about 5.10 lakh cases of bounced cheques, followed by Gujarat with 2 lakh cases. One telecom company had even filed 73,000 cases of cheque bouncing in a single day!
According to a circular issued by the RBI on 9th November, the procedure for return or dispatch of dishonoured cheques is as follows:
(i) The paying bank should return dishonoured cheques presented through clearing houses strictly as per the return discipline prescribed in the Uniform Regulations And Rules for Bankers' Clearing Houses. On receipt of such dishonoured cheques, the collecting bank should despatch it immediately to the payees/holders.
(ii) In relation to cheques presented direct to the paying bank for settlement of transaction by way of transfer between two accounts with that bank, it should return such dishonoured cheques to payees/holders immediately.
(iii) Cheques dishonoured for want of funds in respect of all accounts should be returned along with a memo indicating the reason for dishonour as "insufficient funds".