Banks may reject your cheque payment despite sufficient balance; here's why

If you are an Axis Bank customer then probably might have received SMS from the bank regarding positive pay system of cheque. The bank is introducing this system mandatorily across all verticals from September 1, 2021. Other major banks such as SBI, HDFC, ICICI, BoB, PNB and others have introduced it on an optional basis. But all banks might make it mandatorily very soon to minimize fraudulent activities.

Positive pay

To eliminate banking fraud related to cheque clearance Reserve Bank of India (RBI) introduced this system from January 1, 2021. Under this system re-confirmation of key details may be needed for payments beyond Rs 50,000 through cheque.

Banks are considering to make it mandatory in case of high value cheques for amounts of Rs 6 lakh or more. Banks have been advised by RBI to create adequate awareness among their customers on features of Positive Pay System through all channels.

According to this system the customer has to let the bank know the cheque number, payee name, cheque amount, cheque date etc before the cheque is presented to the bank for clearance. Else, any cheque above the limit will not be honoured, irrespective of whether there is sufficient balance in the account or not.

Limit of positive pay

RBI has told banks to enable the facility for all account holders issuing cheque for amounts of Rs 50,000 and above. It has also been left at the discretion of the account holder.

But to stop fraudulent activities in cheques, banks are now considering making it mandatory for cheques of Rs 5 lakh and above. Bank officials said it might be in place from FY23 subject to RBI approval.

Important points

Some banks are already telling customers that if the details of large-value cheques are not pre-registered, the cheque will be returned.

For big amounts, customers should ensure that details are provided within the time frame prescribed by the banks for hassle-free clearance through net banking, mobile banking or physical submission of cheques. RBI has said only cheques that are registered in the positive pay system will be accepted under the dispute resolution mechanism. Customers would get an SMS on whether the cheque is accepted or rejected for any reason.

Therefore, before you issue a cheque above Rs 50,000 check with your bank whether it has implemented the positive pay system. This facility is being developed by National Payments Corporation of India (NPCI).

All major public and private sector banks are informing customers about this feature. SBI, HDFC, ICICI, Axis, PNB, BoB, Kotak Mahindra Bank, Canara Bank, Union Bank, Yes Bank, IDBI bank and others have already introduced the positive pay system.