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Five important rules about Cheques

The Reserve Bank of India recently implemented many new cheque rules to handle the rise in cheque related fraud cases. Some of them has been given below:

1) SMS alerts: The RBI asked banks to send an SMS alert to both payer and drawer when the cheque is received for clearing. Till now, SMS alerts were compulsory only for debit/credit card transactions. While dealing with suspicious or cheques of high value, banks have been asked to alert the customer by a phone call and obtain confirmation from both the parties involved in the transaction. The account holder’s bank branch must also be contacted.

2) Examination of cheques: Besides sending alerts, banks have been asked to examine cheques under UV lamp. This is applicable if the cheque amount goes over Rs 2 lakh. Also, a mechanism must be put in place to ensure multi-level checking of cheques for amount over Rs 5 lakh. Banks are also required to closely monitor how money is deposited or moved out from newly opened transaction accounts.

3) KYC compliance:  Whenever you open a new bank account, you are supposed to go through a process called Know Your Customer or KYC. It ensures that the bank verifies information about you, thus limiting fraud cases. So, the person writing the cheque will be compliant with KYC rules. The RBI now states that even the recipient should be KYC compliant.

4) CTS-2010 cheques: The use of 100% CTS-2010 compliant cheques should be ensured by the bank. As part of the Cheque Truncation System (CTS), an electronic image of the cheque is transmitted to the cheque-writer’s bank branch through the clearing house, along with other relevant information. It helps eliminate the need for physical movement of the cheque for verification. Thus the scope for fraud is reduced.

5) Cheque-handling infrastructure: RBI stated that high quality of equipment and personnel must be ensured for CTS-based clearing.

RBI to Banks: Alert customers in high value cheque payments

To clamp down on cheque-related fraud cases, the Reserve Bank of India (RBI) on Wednesday asked banks to alert account holders by a phone call and contact the base branch in case of non-home cheques before clearing high value payments.

The RBI also asked banks to send an SMS alert to payer/drawer when cheques are received for clearing and examine cheques under UV lamp for clearance beyond Rs 2 lakh.

The central bank further said multi-level checking should be done before clearing cheques above Rs 5 lakh.

“Banks may consider the following preventive measures for dealing with suspicious or large value cheques: Alerting the customer by a phone call and getting the confirmation from the payer/drawer and contacting base branch in case of non-home cheques,” RBI said in a communication to banks.

The RBI said directions have been issued in the wake of a rise in the number of cheque-related fraud cases. It said cases have been reported where even though original cheques were in the custody of account holders cheques in the same series were presented and encashed by fraudsters.

The RBI said banks may resort to given directions selectively, if not feasible to be implemented systematically.

It further asked banks to take appropriate precautionary measures to ensure that the confidential information are neither compromised nor misused either from the bank or from the vendors’ side.

“Due care and secure handling is also to be exercised in the movement of cheques from the time they are tendered over the counters or dropped in the collection boxes by customers.”

Besides, it also asked banks to ensure usage of CTS-2010 compliant cheques, strengthen infrastructure for cheque handling, KYC compliancy, close monitoring of credits and debits in newly opened accounts.

The central bank said such frauds could have been avoided had due diligence been observed at the time of handling or processing of the cheques.

“Banks are, therefore, advised to review and strengthen the controls in the cheque presenting/passing and account monitoring processes and to ensure that all procedural guidelines including preventive measures are followed meticulously by the dealing staff,” RBI said.

Source: Business Today