The government implemented the ‘Positive Pay System’ today as a hedge against forgery with cheque-based transactions. The Reserve Bank of India introduced the mechanism in September to beef up security of high-value financial dealings.
The issuer of a cheque will now have to submit some details of the instrument – such as date, name of the beneficiary, payee and the amount – to the drawee bank through channels like SMSes, mobile apps, internet banking and ATM.
The details will be cross-checked with the physical instrument by the Cheque Truncation System (CTS). The system will sound an alert both to the drawee bank as well as to the presenting bank in case of any discrepancy. A redressal mechanism will be in place at both ends to resolve the matter.
The RBI had provided instructions regarding the Positive Pay System and asked the lenders to launch the mechanism on January 1. It has made it mandatory for the banks that customers must be informed about the procedure.
The Mechanism
Positive Pay System will be effective for cheques with a valuation of more than Rs 50,000. All account holders issuing cheques for sums of Rs 50,000 and above will be able to use it, depending on the banks. While it is up to the accountholder whether or not to use this service, the banks may consider making it mandatory for cheques of Rs 500,000 or more. The banking regulator said that while using the service is at the accountholder's discretion. The banks may consider making the system mandatory for cheques of over Rs 5 lakh.
Necessity for Customers
Customers have been told by certain banks that if the information of large-value cheques are not pre-registered, the cheque would be returned to them without charge. The customers should ensure that the information are given within the timeframe specified by the banks for hassle-free clearing when a high-value cheque is issued. Only cheques registered in the Positive Pay System would be accepted under the dispute settlement process, according to the RBI. The customers will receive an SMS indicating if the cheque was approved or denied for any specific reason.
