From January 1, 2021, a new cheque clearing mechanism will come into effect in a bid to check banking fraud. The Reserve Bank of India rolled out a ‘Positive Pay System’ a couple of months ago under which those making payments of over Rs 50,000 will need to reconfirm some key details.

To put it simply, Positive Pay is essentially a tool designed to detect fraudulent activity. It does this by matching specific information related to the cheque presented for clearing, like the cheque number, cheque date, payee name, account number, amount, and other details against a list of cheques previously authorized and issued by the issuer.

“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. Under this mechanism, cheques will be processed for payment by the drawee bank based on information passed on by its customer at the time of issuance of cheque. This measure will cover approximately 20 per cent and 80 per cent of total cheques issued in the country by volume and value, respectively,” RBI had said back in August.

The central bank then released detailed guidelines about the new cheque payment mechanism in September.

Here’s all you need to know about the new cheque payment rule of the RBI set to kick in from next year:

  • The concept of Positive Pay involves a process of reconfirming key details of large value cheques.  
  • Under this process, the issuer of the cheque submits electronically, through channels like SMS, mobile app, internet banking, ATM, etc., certain minimum details of that cheque (like date, name of the beneficiary/payee, amount, etc.) to the drawee bank, details of which are cross-checked with the presented cheque by Cheque Truncation System (CTS). Any discrepancy is flagged by CTS to the drawee bank and presenting bank, who would take redressal measures.
  • National Payments Corporation of India (NPCI) shall develop the facility of Positive Pay in CTS. They will also make this available to participating banks. In turn, these banks shall then enable it for all account holders issuing cheques for amounts of Rs 50,000 and above.
  • While the option to avail this facility is at the discretion of the account holder, banks may consider making it mandatory in case of cheques for amounts of Rs 5,00,000 and above.
  • Only those cheques which are compliant with the instructions will be accepted under dispute resolution mechanism at the CTS grids.
  • Member banks are also free to implement similar arrangements for cheques cleared/collected outside CTS as well.
  • Banks have been advised by RBI to create adequate awareness among their customers on features of Positive Pay System through SMS alerts, display in branches, ATMs as well as through their web-site and internet banking.