In the financial system, cheques are an essential aspect in different countries worldwide. First, before going for the loan procedure, or if you are thinking of repaying the amount of your loan through cheque, you must know all about the cheque. How does a cheque operate? This is a very important document that a bank or company uses to make the transaction of various amounts. However, a cheque is considered a negotiable document to transport money.
Who can have the cheque? The cheque issuer should maintain an account, either saving or current, in the bank for the hassle-free amount transfer. For the business person cheque is the safest way to steer the business; the cheque can be easily tracked when necessary if the cheque owner leaves an entry against the cheque respected by the bank.
A cheque is said to be bounced when there is unsuccessful processing of a dispensed cheque due to several reasons. The main reason behind the cheque bounce is the NSF which has non-sufficient funds in the depositor's account. When the issuer shows this reason, then the bank dishonours the cheques. There can be a possibility of the passing of the bad cheques, and this is considered a crime, and the crime is aggravated depending on the amount and whether this action involves crossing state boundaries or the country boundaries.
Insufficient Funds: This is the most common reason when it comes to the cheque bounce. Before repayment of the loan through cheque, one must never forget that the account should have enough amounts that your EMI is scheduled. The bank would not process the amount and would curb the payment.
Mismatched Signature: The second reason for the cheque bounce, the signature should match the bank's record. So, it is important to regard the signature as a vital aspect while writing on the cheque. Sometimes issuer, by chance, signs on the MICR band, and in this case, the bank will again disrepute the cheque.
Damaged Cheque: While handling the cheque, make sure that the cheque should be straight or without any folds. It is always good to deposit a fresh cheque. If there are too many stains or marks, the cheque will bounce.
Date on the Cheque: Sometimes, the problem with the date on the cheque is responsible for the cheque bounce. Many people consider this problem as a small factor, but it can cause serious issues. The issuer faces problems like the cheque date, mainly including disfigured or scribbled numbers.
Scribble on the Cheque: Overwriting on a cheque is also responsible for the cheque bounce. If any mistake happens, it is better to deposit the fresh cheque. When an account holder receives a cheque with mistakes, then he or she can demand the newly written cheque.
The Supreme court asked centrally and the state government whether or not they may devise any scheme that can help people with mortgage waivers in cheque bouncing circumstances involving small sums of cash. As per the previous records against the cheque bouncing, many previous improvements like night courts have not arrested the burgeoning quantity of cheque bouncing below section 138 of the negotiable instruments act. As per the records of Indian states, among the total of 33.44 lakh cases, Maharashtra accounted for 5.6 lakh circumstances, Rajasthan with 4, 8 lakhs, Gujarat with 4.4 lakhs, Madhya Pradesh with 1.7 lakh, Haryana 2, 36 lakh, Punjab 1, 8 lakh and Delhi with 4.1 lakh while talking about the big state West Bengal there are only 309 cheque bouncing circumstances pending in the court. The Supreme court has ordered to verify the details of how many of such loans are declared bad because of cheque bouncing and non-payment have been written off. The government is working on its side, but there are some laws, and if not followed by the person, then legal action can take place for cheque bounce. The payee should present the cheque within three months of the date of its issue. The payee can demand the payment of the cheque amount by issuing a cheque bounce notice. What you can do to defend a bounced cheque. Always keep a copy of all the documents as these relevant documents can prove that a transaction has been made through the cheque.
Penalty by the bank: When the payee is spotted under the cheque bounce circumstances, the bank imposes the penalty in the form of NSF (non-sufficient fund). Banks can also impose the penalty when there is a mismatch in the signature or any other technical issues mentioned above. The penalty depends upon the type of bank where the payee has his account. If the bounced cheque is for repayment, the bank imposes the penalty fee plus the late payment charges. Late payment charges are imposed when the payee is late in the payment, and the court fee varies with the case and the cheque amounts.
Defaulter by RBI: Reserve bank of India has issued the guidelines to authorize the banks to stop issuing the cheque books to the defaulters. If a person cannot repay the loan amount on a scheduled time or has gone through some circumstances like a cheque bounce, then RBI considers that person as the defaulter. A person who has been accused of dishonour of cheque the minimum of four times for an amount exceeding Rs. One crore is not supposed to have the new chequebook in the future.
Impact your CIBIL score: CIBIL score carries the three-digit number which decides all the future facilities you will have from the bank, whether it is any loan or fewer interest rates on loans and many more. Bank uses range from 300-to 900, and the person who has a CIBIL score of more than 750 is considered the good one.
Criminal charges: For the bounced cheque, you can get away with only a small fine paid to the bank if you are lucky and prove that by mistakenly you came across the check bounce-like issues. But if you are irregular for many months, then the aggrieved party can file a civil or criminal case against you. As mentioned above, the Negotiable Instrument Act, 1881, can be applied in case of a cheque bounce. Any bounce in the cheque is punishable under section 138 of the act.
Always make sure that all the cheques you issue are honoured on time. A bank must not issue a non-account payee cheque or a cheque without crossing it to avoid the forgery. The bank must inform the payee through writing or message if they exhaust the money in the account.
The best way to avoid the cheque bounce is never to write a cheque without the money in your bank. It's a responsibility work, and a person should take it seriously as it is considered an offense if the cheque bounces during repayment of the loan. Better to provide the cheque to a person who can take this responsibility just to avoid any kind of financial pressure.
Sometimes by mistake or the payee intentionally makes the mistakes in depositing the cheque, which can put them in trouble. But if a person files a false case against you in the court, then you can file a reply to the case through a lawyer. You can also file a case against the person who filed the false case.
1. What precautions must one take while using the cheque?
A payee must check that all the details on the cheque are filled correctly. Present the cheque for the payment during the presentation period, which is as per the rule of eight days. They can ask for identification if the person is unknown.
2. What are the precautions for the issuer?
Bank customers must check the balance of the account before receiving the cheques. Write only in the space given on the cheque. Always indicate the date and place of issue (year, month, and day). Observe the pre-printed mentions on the cheque. Always cross the squares and the unfilled spaces with a continuous horizontal line.