Cheque bounce is an offensive act under the Negotiable Instruments Act of 1881. If your cheque bounces, you may need to face serious consequences. These include penalties, imprisonment, or both. It can also impact the payer’s credibility, credit score and other such negative effects.
Read on to learn about the meaning of cheque bounce, its reasons and the charges.
A cheque is a written agreement of payment by the payer, who is the person issuing the cheque, to the payee, who is the person receiving the cheque. The payer’s bank transfers the amount from the payer’s account to the payee’s account. However, in some instances, the transaction may not go through due to various reasons. This is called a cheque bounce or a cheque return.
The Reserve Bank of India (RBI) released a new rule regarding this in August 2021. As per this rule, individuals who plan on using cheques need to maintain a minimum bank balance. If you don’t maintain the required balance, the issued cheque will bounce. This rule applies to all private and national banks.
Check out the various reasons that can lead to a bounced cheque:
A cheque can return or bounce if your account has insufficient funds. Since it is an offence according to the Negotiable Instrument Act of 1881, it attracts a penalty. Besides the monetary penalty, it can also lead to imprisonment for some years.
The date mentioned on a cheque states its validity. In case you present a cheque at a bank for payment after its expiry date, the cheque will be returned.
Another reason for cheque return is damaged or disfigured cheques. The financial institution may return your cheque if it is torn or folded or if the written details are not visible. To avoid these circumstances, try not to fold the cheque and keep it safe from damage.
The payer can request the financial institution to stop payment on the cheque. The bank will return the cheque in such a case.
A financial institution can also return a cheque if the information, like the account number or the signature, doesn’t match with their records. It creates concerns about the authenticity of the cheque and therefore, the bank will return it.
Here are the cheque bounce charges levied by top financial institutions:
|Cheques deposited for local clearing at the home branch:₹500
|Bank of Baroda
|Inward Return:₹125 – Up to ₹1 lakh ₹250 – > ₹1 lakh < ₹1 crore₹500 – > ₹1 croreOutward Return:₹250 – Up to 1 lakh₹500 – > ₹1 lakh < ₹1 crore₹750 – > ₹1 crore Technical Reason: NIL
|Insufficient Funds:1st- ₹450 for regular citizens and ₹400 for senior citizens2nd- ₹500 for regular citizens and ₹450 for senior citizens3rd onwards- ₹550 for regular citizens and ₹500 for senior citizensFunds Transfer Cheque Return:₹350 for regular citizens and ₹315 for senior citizens Technical Reason: ₹50 for regular citizens and ₹45 for senior citizens
|Cheques returned unpaid by others (outstation/ local):Up to ₹1 lakh- ₹150 + GSTAbove ₹1 lakh- ₹250 + GSTCheques drawn to SBI returned due to inadequate funds:Starting at ₹500 + GST (irrespective of the amount and depending on the customer)Cheque drawn to SBI was returned due to technical reasons:₹150 + GST (No charges if the customer isn’t at fault)
|Outward Return:₹200 (financial reasons)Inward Return:₹500 (financial reasons)₹50 (non-financial reasons except verification of signatures)
Disclaimer: The above charges are subject to change at the bank’s discretion.
Now that you know the meaning of cheque bounce and the reasons for it, take proactive steps to avoid it. This helps avoid any unnecessary financial liabilities and other severe consequences. In case your cheque bounces and you require funds to bridge your monetary gaps, get a Fibe Instant Personal Loan.
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To avoid cheque bounce charges, ensure that you have adequate funds in your bank account. Make sure that your cheque is not damaged or torn and that all the details match as per the bank’s records.
The payee also needs to pay cheque bounce charges in case of insufficient funds or other reasons, including signature mismatch. However, this may vary depending on the bank.
Yes, you can get bail in a cheque bounce case.
You may face legal proceedings if your cheque returns due to insufficient funds. The payee may allow you to re-issue a cheque within 3 months. In case of a cheque dishonour, you may face imprisonment.