Before you sign big cheque, check ‘Positive Pay’ rule

While writing cheques for a high-value payment, it is important for you to know certain things to avoid misuse. To prevent cheque-related frauds, the Reserve Bank of India (RBI) has placed systems – ‘Positive Pay’. It protects the issuer and the receiver. If you are issuing a cheque above ₹5 lakh, there are rules to follow.

These rules vary slightly by bank, but they all follow the RBI’s guidelines. The idea is to add an extra layer of confirmation before the money leaves your account. You must share details about the cheque before the receiver presents it for clearing. Ignoring this can lead to the cheque being rejected in certain cases. Let’s understand how it works and what you should do!

What is positive pay and how it work?

The Positive Pay System (PPS) was introduced by the RBI in 2021. It aims to reduce cheque fraud. It asks the person writing the cheque (the issuer) to confirm its key details with the bank. This is done before the cheque is cleared.

You must provide information such as the cheque number, issue date, amount and payee name to your bank before the clearance of the cheque. These details are usually sent through your bank’s mobile app, online banking, ATM, or by visiting a branch. Once submitted, these details are cross-checked when the cheque is presented for payment.

If there is a mismatch between what you reported and what is on the cheque, the bank will flag it. This protects both the payer and the receiver. It also helps banks detect any unauthorised changes or tampering. This process is mandatory for cheques above Rs 5 lakh. Some banks may allow you to use PPS for lower amounts, but it is not required by the RBI.

What cheque issuers should keep in mind

If you are about to issue a high-value cheque, act carefully. First, make sure all details on the cheque are accurate. Write clearly. Avoid overwriting. Use permanent ink. Sign in the correct space. Then, submit the cheque details through your bank’s Positive Pay facility. Make sure the details match exactly. Even small errors can cause problems, as mismatches can lead to rejection.

You must send the information as soon as you issue the cheque. Some banks ask for a time gap between submission and presentation. Check your bank’s rules. If you miss this step, the cheque may bounce even if your account has enough funds.

What happens after submission?

Once you send the cheque details to the bank, the system stores them. When the payee submits the cheque for clearing, the bank compares the information. If everything matches, the cheque goes through. If there is a mismatch, the bank flags it. It may ask the issuer to confirm or reject the payment.

This step helps prevent fraud or errors. The clearing process takes a little longer in such cases, but it adds safety. Some banks also send alerts to the issuer when a cheque is presented. This gives you a chance to stop a transaction if it looks suspicious. It is worth checking your bank’s website or mobile app for how to use Positive Pay. They often have a separate option in their services menu. If you are unsure, you can also visit a branch or call customer support.

The Positive Pay System adds security but also requires action from the issuer. Make sure to share the cheque details with your bank. Use clear writing. Double-check figures and names. It takes a few extra minutes but saves you from big trouble.

(Disclaimer: The views of the writer do not represent the views of WION or ZMCL. Nor does WION or ZMCL endorse the views of the writer.)