New Rules for Issuing a Cheque
If you pay by cheque, be extra cautious before writing a cheque to anyone. The Reserve Bank of India (RBI) enacted several banking regulatory amendments that took effect from 1 August 2021. The central bank has chosen to make bulk clearance available 24 hours a day, seven days a week. From August, the National Automated Clearing House (NACH) has been functioning 24 hours a day.
NACH, operated by the National Payments Corporation of India's (NPCI) is a bulk payment system that enables one-to-many credit transfers such as dividend, interest, wage, and pension payments. It also makes it easier to collect payments for utilities like energy, gas, phone, and water, as well as loan payments, mutual fund investments, and insurance premiums.
Because NACH is now available 24 hours a day, you must be especially cautious while making a cheque payment because it may be cleared and encashed even on non-working days and holidays. So, when you write a check, be sure your bank account has enough money in it; otherwise. The cheque will bounce.
The Reserve Bank of India (RBI) adopted a 'Positive Pay' mechanism in January this year to improve the security of cheque-based transactions. For payments over Rs.50,000, the 'Positive pay system' may need re-confirmation of important facts on the cheque. The issuer of the cheque sends facts about the cheque presented for clearings, such as the cheque number, cheque date, payee name, account number, amount, and other details, electronically against a list of cheques previously authorised and issued by the issuer.
What Are the New Cheque Rules in India?
The Reserve Bank of India (RBI) has introduced new rules to make cheque transactions safer and faster. Here are the main changes:
- Positive Pay System (PPS): If you write a cheque for more than ₹50,000, you must confirm the cheque details (like cheque number, date, amount, and name of the person) with your bank before it is cleared.
- Only CTS Cheques Are Allowed: Banks now only accept CTS-2010 format cheques, which are more secure and easier to process digitally.
- Clear and Correct Details Needed: Make sure the date is written clearly, the signature matches your records, and there are no overwrites. If there are mistakes, the bank can reject the cheque.
- No Changes Allowed on Cheques: You cannot make changes to important details like name or amount. If you do, the cheque may be returned.
- Cheque Validity: A cheque is valid for only 3 months from the date written on it. After that, it cannot be used.
These rules apply to all banks and are meant to reduce fraud and help cheques get processed faster.
How Do New Cheque Rules Affect You?
These new rules may change how you write and use cheques. Here's what you need to know:
- Extra Step for Big Payments: For cheques above ₹50,000, you’ll need to tell your bank the cheque details before it is processed.
- Be Careful While Writing Cheques: Any mistake, like an unclear date or wrong signature, can lead to the cheque being rejected.
- More Safety: These rules help protect you from cheque fraud.
- Faster Process: Since banks are now using digital systems, cheque clearance happens faster and with fewer issues.
- Less Confusion: Following these new rules will help avoid delays and make sure your cheque payments go smoothly.
FAQs on New Rules for Issuing a Cheque
- What are the new cheque rules introduced by RBI?
The Reserve Bank of India (RBI) has introduced rules like the Positive Pay System for cheques above ₹50,000, allowing only CTS-2010 format cheques, and strict verification of details such as date, signature, and amount. These rules help prevent fraud and make cheque processing more secure and faster.
- Can I issue a cheque without a date under the new rules?
No, you must always mention a clear and correct date on the cheque. Undated or postdated cheques beyond 3 months are not valid and may be rejected by the bank.
- What happens if I make a mistake on the cheque?
If you overwrite or make any corrections in key areas like the name or amount, the bank can reject the cheque. It’s better to cancel the cheque and write a new one if there's an error.
- Are there any penalties for not following the new cheque rules?
While there are no direct penalties, your cheque may be returned unpaid, causing delays in payments and charges for dishonoured cheques, especially in the case of loan EMIs or bill payments.
- Do the new cheque rules apply to post-dated cheques?
Yes, the rules apply to all types of cheques, including post-dated ones. Make sure the cheque is within the 3-month validity period and follows the correct format to avoid rejection.
- What is the Positive Pay System and how does it work?
The Positive Pay System is a safety feature where you share cheque details (cheque number, amount, date, and name) with your bank before issuing the cheque. The bank then matches these details when processing the cheque to prevent fraud. It is mandatory for cheques above ₹50,000 in many banks.
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