The Reserve Bank of India (RBI) decided to introduce the ‘positive pay scheme’ for cheque payments earlier this year. Under the law change, for payments above Rs 50,000, re-confirmation of key information would be needed. This new provision for the payment of cheques will come into force on 1 January 2021.
RBI Governor Shaktikanta Das made the announcement in August MPC. In order to keep customer protection in view and to minimize the cases of fraud and harassment with regard to cheque payment, the new rule ‘Positive Pay’ has been implemented.
Key things to know about the new rule By The Reserve Bank Of India:
- Under the Positive Pay mechanism, according to the Reserve Bank of India, after an account holder issues a cheque to another, they will share the details of the cheque with the bank. An account holder shares with the bank the specifics of the issued cheque, such as Cheque Number, Cheque date, Payee name, Amount, Account number, etc
- Banks will have to equate the information available on the cheque with those that the issuer has given meaning when the beneficiary submits the cheque for encashment before making payment against the cheque, the cheque details are compared with the details provided to the bank through Positive Pay, and if the details match, the cheque is honored.
- A way of reconfirming key information of broad value tests includes the principle of Positive Pay. CTS flagged any difference in information to the drawee bank and presenting bank, which would take redress steps.
Banks shall allow the issuance of cheques for sums of Rs 50,000 and above for all account holders. Though the use of this facility is at the choice of the account holder, banks may in the case of cheques, consider making it mandatory for the sum of Rs 5,00,000 and above.
What is a positive pay system?
Reserve Bank of India tells in its statements, “The CTS-2010 standard specifying minimum-security features on cheque leaves acts as a deterrent against cheque frauds, while standardization of field placements on cheque forms enables straight-through-processing by use of optical/image character recognition technology.”
“To further augment customer safety in cheque payments and reduce instances of fraud occurring on account of tampering of cheque leaves, it has been decided to introduce a mechanism of Positive Pay for all cheques of value Rs 50,000 and above,” it included.
It should be added that the Cheque Truncation System (CTS) for clearing cheques is operational across India. It currently covers 2% and 15% of total retail payments, respectively, in terms of volume and value. The average value of a cheque cleared under CTS is currently Rs 82,000, according to the available data.