Dishonoured Cheque- What Are Cheque Bounce Charges?

Updated on: 29 Aug 2024

Cheque bounce charges are a penalty that you must pay when the cheque fails to provide the promised amount. Writing a cheque is an agreement to pay the mentioned sum bound by the law. So, when you cannot honour it, these charges are a result.

This may happen when your cheque payment is not cleared due to insufficient funds. This is called a ‘dishonoured’ or ‘bounced’ cheque. This is a punishable offence by law that can lead to a fine or imprisonment, depending on the circumstances.

Read on to know about cheque bounce charges, penalties, common reasons to avoid them and more.

Penalty and Punishments in India

Dishonouring a cheque is a punishable offence under Section 138 of the Negotiable Instruments Act of 1881. According to this, you may have to face one of the following penalties:

A fine of twice the cheque’s amount
2 years of imprisonment
Maybe both, depending on the court’s order

Hence, you must maintain the required balance before issuing the cheque.

Common Reasons for Cheque Bounce

Knowing when and why your cheque may bounce helps you avoid such circumstances. Here are some reasons to keep in mind.

If your account does not have the required amount mentioned on the cheque
If the payee presents the cheque after three months of its issuing date
If the payee deposits it after the expiry date
If there is overwriting on the cheque
If the cheque gets damaged and the details are not visible
If the drawer’s signatures are unclear or mismatched
If the amount written in digits and words does not match
If the cheque is post-dated
If the bank has suspended the account

Also Read: What Is a Post-Dated Cheque?

New RBI Rules for Cheque Bounce

In August 2021, the Reserve Bank of India announced a new rule related to bounce cheques. Here are its key pointers:

Maintaining a minimum account balance is important if you rely on cheques for financial transactions
The National Automated Clearing House will remain operational 24/7
This rule is applicable to all government as well as private-sector banks

This allows you to clear the cheque faster.

Also Read: Fact about Cheque Leaf

Cheque Bounce Charges of Top Banks

Here is an overview of the cheque bounce penalty that applies to both parties of transactions of a few leading banks in India:

Bank	Outward	Inward	Technical Reason
State Bank of India	Up to ₹1 lakh: ₹150 + GST Above ₹1 lakh: ₹250 + GST	For SME customers:₹500 for first 3 cheques₹1,000 for 4th cheques For other customers:₹500 + GST	₹150 + GST
ICICI Bank	₹200 for financial reasons	₹500 for financial reasons and ₹50 for non-financial reasons except for signature verification	₹200 for NACH Returns
HDFC Bank	1st cheque: ₹4502nd cheque: ₹5003rd cheque onwards: ₹550	₹350 per instance	₹50 for mismatched signs, post-dated, etc. and ₹500 for NACH Returns
Kotak Mahindra Bank	Up ₹350 for first return of the month and ₹750 on the second return and onwards	Up ₹1,000	₹50
Punjab National Bank	₹150 for up to ₹1 lakh₹250 from ₹1 lakh to ₹10 lakhs₹150 for over ₹10 lakhs	₹200 for up to ₹1 lakh₹500 from ₹1 lakh to ₹1 crores₹2,000 for over ₹1 crores	No charge
Axis Bank	₹500 per instance	₹50 for the 1st return₹100 from the 2nd return onward	No charge

Note that all these bank cheque bounce charges exclude GST and other applicable taxes. Also, these fees may vary at the discretion of the bank.

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FAQs on Charges on Cheque Bounce

How much does the bank charge for bounced cheques?

These charges vary from one bank to another. Moreover, it depends on whether it’s an inward or outward deposit.

What is the new rule for cheque bounce?

The RBI issued the latest cheque bounce notice in August of 2021, which states the following:

All individuals must maintain sufficient balance for the cheque to clear to avoid a penalty
The National Automated Clearing House (NACH) will remain operational 24X7

How can I avoid paying a cheque bounce charge?

Here are some tips to avoid these charges:

Ensure that you maintain an adequate balance in your account
Check the details on the cheque
Make sure not to issue post-dated cheques if you don’t have sufficient balance
Communicate with the recipient
Avoid overwriting cheques
Write the amount in words and figures accurately
Ensure there’s no mismatch between the amount in words and figures
Avoid making any mistakes when signing the cheque

Is it possible to file an FIR for cheque bounce?

Yes. It is possible to file an FIR against the issuer under Section 420 or 406 of the Indian Penal Code (IPC).

How many times is it possible for a cheque to bounce?

There is no limit, but most banks warn you 3 times before filing a complaint. Nevertheless, it’s best to add funds to your account to avoid cheque bounce or any legal trouble.