Cheque Bounce Charges - An Overview
A drawer presents a cheque as a demand for money due to a person or an organisation. It is a written promise or agreement made between the drawer and the drawee to pay money. When a bank declines to honour a cheque that was used to make a payment, the words ‘dishonoured cheque’ or ‘cheque bounce’ are used. The bank also charges a specific amount as a fee from the clients for cheque bounce.
A Cheque Could Be Dishonoured for the Following Reasons
- If the cheque's drawer does not have enough money to cover the transaction's amount
- If the bank account does not have sufficient funds to honour a cheque on the appropriate date, the account will be closed
- If the person who issued the cheque issues a ‘stop payment’ order, the transaction will be stopped
- If the payee's name is not clear or isn't provided
- If the account number is unclear or absent
- If the bank is implied in the demise, insolvency, or sanity of the drawer, the state of insolvency applies
- The value or amount defined in words and pictures must match the other account
- If the drawer's signature differs from a particular signature processed by the bank, it is considered to be an unusual or irregular signature
- Any alterations or overwriting (no changes or overwriting will be allowed even with the signature of the drawer)
- A post-dated cheque cannot be presented to the bank before the original date of the fund's transfer
- A cheque must be presented to the bank within three months of the time or date mentioned on the check, beyond which it will bounce or be disregarded
- When an account is suspended under the authority of the government or a court, the bank will not honour a cheque with that specific account number.
Consequences of a Cheque Bounce
When a cheque is returned unpaid, the bank sends the payee a ‘cheque return memo’ explaining the situation. The payee may decide to submit the cheque again in the hopes that it will be honoured the second time, but they should be aware of the consequences of repeated dishonours because in some cases, but not always, they will give them the right to bring legal action against the drawer. If a cheque bounces, the drawer can only be held liable if the money on the Cheque was intended to pay off a debt or settle another account owed by the payee to the defaulter and not for the distribution of benefits or any other illegal activity.
After giving the drawer the chance to directly return the cheque money, the payee may initiate legal proceedings against the drawer by announcing a written notice for the same. The payee may file a criminal complaint under Section 138 of the Negotiable Instruments Act if the payer is unable to make the payment within 30 days of the notice's distribution. A power of attorney or the payee may both bring a claim against a bounced cheque .
What Happens If the Payee Takes Legal Action against the Drawer?
The drawer is given the option to give the cheque amount directly if the payee decides to proceed legally.
- To do this, the payee must notify the drawer in writing within 30 days of accepting the bank's ‘Cheque Return Memo’
- Declare in the notice that it must be returned to the payee of the cheque within 15 days of receipt.
According to Section 138 of the Negotiable Instruments Act, of 1881, the payee has the full right to file a criminal report against the drawer if the drawer continues to refuse to give the receiver the money within 30 days of receiving the notice. However, a magistrate's court must receive the report or complaint.
What Are the Penalties and Punishments Associated with a Dishonoured Cheque?
The court will start the case after receiving the complaint and any pertinent reports. If the drawer is found to be at fault or culpable, they might face up to two years in prison as well as a fine or penalty equal to twice the amount of the cheque. In addition, the banks will have the option of closing the person's account (in the event of continued cheque bounce offences) or denying them access to their cheque book facility. In addition, the bank may demand a fine from both the drawer and the payee for the inconvenience, extra paperwork, and time lost by the bank.
Cheque Bounce Penalty by Popular Banks
SNo. | Bank | Charges |
---|---|---|
1 | SBI | Cheque/bill deposited with SBI returned unpaid by others (outstation/ local)
Cheque Returned Entries for Cheques carried on SBI (for inadequate funds only) (for all segments)
Cheque returned costs for Cheques carried on SBI (for professional reasons) for all shares when the customer is at mistake.
|
2 | HDFC Bank | Saving A/c
Current A/c
Automatic Savings
Senior Citizen Account
|
3 | ICICI Bank | Local Charges
Outstation Charges
|
4 | Axis Bank | Return of cheques collected at the home branch for limited clearing – ₹500/- per cheque |
5 | Bank of Baroda | Cheque (collected by BOB’s client and returned overdue (Inward Return)
Cheque (carried on BOB) paid (Outward Return)– (Financial Reason)
In case the bank continues out of funds; original interest is at 7.5% over base rate is to be credited extra
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