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Know the date of payment when you issue a cheque

When a cheque is issued, what should be considered the date of payment? Is it when the cheque is physically handed over or when it is debited from the drawer’s account and credited to the payee’s?
Under the Negotiable Instruments Act, 1881, a cheque is an instrument negotiated by delivery. The drawer is discharged when payment is made in due course. In simple terms, this means when the cheque is tendered, there is a presumption that payment would be realised in due course, and, hence, the date of payment is considered to be the date on which the cheque is delivered, regardless of when it is actually presented for payment. This principle would not apply in the event of the cheque getting dishonoured. Thus, the date of tendering is to be considered the date of payment, just like a cash payment. This is the legal interpretation enunciated by the Supreme Court.

RBI simplified KYC (Know Your Customer) for Bank Customers

The Reserve Bank of India released a note along with a poster and a booklet comprising a few common questions relating to Know Your Customer (KYC) norms for opening bank accounts. The objective of this is to bring awareness among the general public about the KYC simplification measures taken by the Reserve Bank in the recent times with a view to help the common man in opening bank accounts.

Measures taken for simplification:

1. Single document for proof of identity and proof of address

There is now no requirement of submitting two separate documents for proof of identity and proof of address. If the officially valid document submitted for opening a bank account has both, identity and address of the person, there is no need for submitting any other documentary proof.

Officially valid documents (OVDs) for KYC purpose include: Passport, driving licence, voters’ ID card, PAN card, Aadhaar letter issued by UIDAI and Job Card issued by NREGA signed by a State Government official.

To further ease the process, the information containing personal details like name, address, age, gender, etc., and photographs made available from UIDAI as a result of e-KYC process can also be treated as an ‘Officially Valid Document’.

2. No separate proof of address is required for current address

Since migrant workers, transferred employees, etc., often face difficulties while submitting a proof of current address for opening a bank account, such customers can submit only one proof of address (either current or permanent) while opening a bank account or while undergoing periodic updation. If the current address is different from the address mentioned on the proof of address submitted by the customer, a simple declaration by her/him about her/his current address would be sufficient.

3. No separate KYC documentation is required while transferring accounts from one branch to another of the same bank

Once KYC is done by one branch of the bank, it is valid for transfer of the account to any other branch of the same bank. The customer would be allowed to transfer her/his account from one branch to another branch without restrictions and on the basis of declaration of his/her local address for communication.

4. Small Accounts

Those persons who do not have any of the ‘officially valid documents’ can open ‘small accounts’ with banks. A ‘small account’ can be opened on the basis of a self-attested photograph and putting her/his signature or thumb print in the presence of an official of the bank. Such accounts have limitations regarding the aggregate credits (not more than Rupees one lakh in a year), aggregate withdrawals (not more than Rupees ten thousand in a month) and balance in the accounts (not more than Rupees fifty thousand at any point in time). These small accounts would be valid normally for a period of twelve months. Thereafter, such accounts would be allowed to continue for a further period of twelve more months, if the account holder provides a document showing that she/he has applied for any of the officially valid document, within twelve months of opening the small account.

5. Relaxation regarding officially valid documents (OVDs) for low risk customers

If a person does not have any of the ‘officially valid documents’ mentioned above, but if is categorised as ‘low risk’ by the banks, then she/he can open a bank account by submitting any one of the following documents:

(a) identity card with applicant’s photograph issued by Central/State Government Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and Public Financial Institutions;

(b) letter issued by a gazetted officer, with a duly attested photograph of the person.

6. Periodic updation of KYC

Time intervals for periodic updation of KYC for existing low/medium and high risk customers have been increased from 5/2 years to 10/8/2 years, respectively.

7. Other relaxations

a. KYC verification of all the members of Self Help Groups (SHGs) is not required while opening the savings bank account of the SHG and KYC verification of only the officials of the SHGs would suffice. No separate KYC verification is needed at the time of credit linking the SHG.

b. Foreign students have been allowed a time of one month for furnishing the proof of local address.

c. In case a customer categorised as low risk is unable to submit the KYC documents due to genuine reasons, she/he may submit the documents to the bank within a period of six months from the date of opening account.

Dishonour/Bouncing of Cheques – RBI Guidelines

In case of frequent dishonor of cheques, RBI has issued following procedure for the banks to follow:

1.   In case of dishonor of cheques for the third time on a particular account of the drawer for a particular financial year, bank should issue “cautionary advice” to the account holder.

2.  If it continues for the fourth time also, in case of cheques valuing for more than Rs 1 crore on a particular account for the financial year no fresh cheques are to be issued. Banks may also consider closing the current account at its discretion.