No one likes to be on the receiving end of frauds. People work hard and earn so they can spend their hard-earned money on things that they like or invest wisely either for their retirement or for future generations.
If you regularly watch the news channel you would know that bank frauds are very common in India. Through this article, StockyLab wants to make aware its investors of the latest step taken by the Reserve Bank of India to prevent frauds related to cheques. Most people are not even aware that fraud can happen via cheque. Do you know how many banking frauds happen in India each year? According to data released by the RBI in its latest issue of Report on Trend and Progress of Banking in India, in the year ended March 2020, there were 202 cases of fraud reported summing up to Rs 39 crores.
What is a Positive Pay System?
To prevent cheque forgery, RBI last year in August announced that it will come up with a Positive Pay system. The Positive pay system is effective from 1 January 2021. Under this system, when you are handing over a cheque to someone, you need to capture all details of the cheque and share the details with your bank for verification. The Cheque Truncation System (CTS) will match the details of the cheque and the details provided by you. In case there is a mismatch, it will be flagged by the CTS to the presenting bank and the drawee bank and the cheque will not be cleared. The bank may ask the issuer of the cheque to again share the details with them. If the details match, the cheque will be cleared. This facility is being developed by the National Payments Corporation of India (NPCI).
Features of Positive Pay System
- The issuer has to electronically submit details like date, name of the beneficiary, payee and amount of the cheque issued to their bank.
- This can be done through various channels like SMS, internet banking, ATM and mobile app. To start with, not all channels may be activated by your bank. You need to check your bank's website and find the most accessible way to share the details.
- This system is only applicable only if the amount of the cheque is Rs 50,000 and above. If you are a frequent issuer of cheques and you don't want to submit details for every cheque (above Rs 50,000) then you could request your bank and the bank may increase the limit to Rs 5,00,000 and above. The limit of Rs 50,000 will cover approximately 80 percent of transactions by value and 20 percent of transactions by volume.
The RBI has made it very clear to the banks that only cheques that are compliant with a positive pay system should be accepted. The RBI has also advised banks to bring awareness among its customers.