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POLICY ON DISHONOUR OF INWARD CHEQUES / DISHONOUR OF ECS MANDATES FOR THE REASON INSUFFICIENT FUNDS

To enforce financial discipline among the customers, for operation of accounts with cheque book facility, in the event of dishonour of inward cheques and dishonour of ECS mandates for the reason " Insufficient Funds ", guidelines are in force and are as follows:

I. Dishonour of inward cheques of value less than ` 1 Crore and dishonour of ECS mandates for the reason "Insufficient Funds":

    • Dishonour of an inward cheque for the reason insufficient funds of value less than ` 1 Crore, on six occasions during the financial year will attract stoppage of cheque book facility and closure of account.

    • If an inward cheque is dishonoured for the reason insufficient funds for a fifth time in a particular account of the drawer during the financial year, a cautionary advice will be issued to the concerned constituent, drawing attention to aforesaid condition and consequential stoppage of cheque facility, in the event of inward cheque being dishonoured for the reason insufficient funds on sixth occasion on the same account during the financial year. Similar cautionary advice will be issued before closing any such account.

    • Bank will be constrained to close the account, if ECS mandates are dishonoured for the reason insufficient funds on four occasions during the financial year. A cautionary notice to this effect shall be served to the account holder.

    • If the ECS mandate is dishonoured for the reason insufficient funds for a third time in a particular account of the drawer during the financial year, a cautionary advice will be issued to the concerned constituent, drawing attention to aforesaid condition and consequential closure of the account, in the event of ECS mandate being dishonoured for the reason insufficient balance on fourth occasion in the same account during the financial year.

    • Bank has the discretion to waive the above condition, on case to case basis.

    • Date of return of cheques/failed ECS transactions for the reason insufficient funds shall be furnished in the credit proposal and shall be taken into account, while taking credit decision.

    • The cases reported in prescribed format shall be monitored and reviewed by the bank periodically and the guidelines shall be modified, wherever necessary.

II.Dishonour of Cheques of value ` 1 Crore and above cheques favouring Stock exchanges irrespective of the amount, for the reason “Insufficient Fundsâ€: "Insufficient Funds":

    • Dishonour of an inward cheque for the reason insufficient funds valuing ` 1 crore & above and cheques favouring Stock Exchanges irrespective of the amount, on four occasions during the financial year will attract stoppage of cheque book facility and closure of accounts may also be considered at our discretion.

    • However, in respect of advances accounts such as Cash Credit, Overdraft, the need for continuance or otherwise of these facilities and the cheque facilities shall be reviewed by the appropriate authority other than the sanctioning authority.

    • If an inward cheque is dishonoured for the reason insufficient fund for third time in a particular account of the drawer during the financial year, a cautionary advice will be issued to the concerned constituent, drawing attention to aforesaid condition and consequential stoppage of cheque facility, in the event of inward cheque being dishonoured for the reason insufficient funds on fourth occasion on the same account during the financial year. Similar cautionary advice will be served before closing such account.

    • Dishonour of inward cheques favouring Stock Exchanges irrespective of the amount, for the reason " Insufficient Funds " shall be reported by the branches periodically to the controlling office. Data in respect of cheques drawn in favour of Stock Exchanges and dishonour for the reason insufficient funds shall be consolidated separately by the bank, irrespective of the value of such cheques, as a part of its MIS relating to broker entities, and shall be reported to their controlling offices.

III.General:

  • Paying Bank should return the dishonoured cheques for the reason insufficient funds presented through clearing house strictly as per the return discipline prescribed for respective clearing house in terms of Uniform Regulation and rules for Bankers' clearing house. The Collecting Bank in respect of such dishonoured cheque for the reason insufficient funds should dispatch/deliver it immediately to the payees/holders.

  • After three occasions of dishonour of ECS mandate, information/cautionary advice be given to the lodger of ECS

  • In relation to cheques presented directly to the paying Bank for settlement of transaction by way of transfer between two accounts with that Bank, it should return such dishonoured cheques for the reason insufficient funds to payee/holders immediately.

  • Cheques dishonoured for the reason insufficient funds in respect of all accounts should be returned /dispatched to the customers without delay, in any case within 24 hours, along with a memo indicating therein the reasons for dishonour as " Insufficient Funds ".

  • For the purpose of adducing evidence to prove the fact of dishonour of inward cheque for the reason insufficient funds on behalf of a complainant (i.e., payee / holder of a dishonoured cheque) in any proceeding relating to dishonoured inward cheques before a court, consumer forum or any other competent authority, bank shall extend full co-operation to furnish documentary proof of fact of dishonour of inward cheques for the reason insufficient funds.

  • The branch head shall take a decision on stopping of issuing cheque book/closure of account and he/she shall take a decision in consultation with appropriate sanctioning/reviewing authority, in case of limits sanctioned to parties.

  • As inward cheques are handled at LPCs/CPC, most of the time branches are not aware of the reason for cheque return unless proper narration is entered by LPC/CPC, LPC/CPC shall ensure that while returning any cheques a clear and proper reason for returning the cheque may be fed in the narration column to avoid ambiguity.