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Monthly Archives: November 2014

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 asks banks to be cautious on inoperative account payments

The Reserve Bank has asked banks to exercise caution before making payments to customers claiming funds lying idle in inoperative accounts.

“Banks are advised to invariably verify the genuineness of the transactions and ensure that the amounts paid to the customers are properly audited by the internal auditors / statutory auditors,” RBI said in a communique to banks.

It also asked banks to carry out proper due diligence in accordance with risk category of the customers before making any such payments.

The RBI directive came in the wake of rising cases where banks claimed substantial refunds from the Depositor Education and Awareness Fund, soon after transferring the amounts in the fund.

RBI said it was not clear as to how the customers or claimants, who did not operate the account for ten years or more, approached the banks for repayment immediately after the balances in their inoperative accounts were transferred to the fund.

“Banks should, therefore, follow all instructions meticulously in respect of inoperative accounts,” RBI said.

As per the RBI directive, banks have been advised to carry out special efforts to trace the customers in respect of inoperative accounts.

As per the RBI guidelines, banks are required to pay back the amounts laying in inoperative accounts for ten years or more, along with interest.

They later can lodge a claim for refund from the Depositor Education and Awareness Fund for an equivalent amount paid to the customer/depositor.

Source: Times of India