Protect Against Cheque Fraud: Your Guide To Positive Pay

When writing cheques for a high-value payment, it's important to be aware of certain things to prevent misuse. To combat cheque-related frauds, the Reserve Bank of India (RBI) has implemented a system called ‘Positive Pay’, designed to protect both the issuer and the receiver. 

If you are issuing a cheque above Rs 5 lakh, there are specific rules to follow. These rules may vary slightly by bank, but they all adhere to the RBI’s guidelines. The core idea is to add an extra layer of confirmation before the money is debited from your account. You must share details about the cheque with your bank before the receiver presents it for clearing. Failing to do this can lead to the cheque being rejected in certain cases.

Let’s understand how it works and what steps you should take!

What Is The Positive Pay System (PPS) And How Does It Work

The Positive Pay System (PPS) was introduced by the RBI in 2021 with the aim of reducing cheque fraud. It requires the person writing the cheque (the issuer) to confirm the cheque's key details with their bank before the cheque is cleared.

You are required to provide information such as the cheque number, issue date, amount, and payee name to your bank before the cheque is processed for clearance. These details can be submitted through your bank’s mobile app, online banking, ATM, or by visiting a branch. Once submitted, these details are cross-checked by the bank when the physical cheque is presented for payment.

If there is a mismatch between the details you reported and the details on the cheque, the bank will flag it. This process helps protect both the payer and the receiver and assists banks in detecting any unauthorized changes or tampering. This process is mandatory for cheques above ₹5 lakh. Some banks may offer the option to use PPS for lower amounts, but it is not mandated by the RBI.

What Cheque Issuers Should Keep In Mind

If you are planning to issue a high-value cheque, exercise caution. First, ensure all details on the cheque are accurate. Write clearly, avoid overwriting, use permanent ink, and sign in the designated space. Then, submit the cheque details through your bank’s Positive Pay facility. It is crucial that the details you submit match exactly what is on the cheque. Even small discrepancies can lead to rejection.

You should send the information to your bank as soon as you issue the cheque. Some banks specify a required time gap between the submission of details and the presentation of the cheque. Always check your bank’s specific rules. If you miss this step, the cheque may be returned unpaid even if you have sufficient funds in your account.

What Happens After Submission 

Once you submit the cheque details to your bank, the system stores this information. When the payee presents the cheque for clearing, the bank compares the information from the physical cheque with the details you provided. If everything matches, the cheque proceeds with the clearing process. If a mismatch is detected, the bank will flag it and may contact the issuer to confirm or reject the payment. This step enhances security and helps prevent fraud or errors, although it may slightly extend the clearing process in such instances.

Some banks also offer the service of sending alerts to the issuer when a high-value cheque is presented. This provides you with an opportunity to investigate or stop a transaction if it appears suspicious. It is advisable to check your bank’s website or mobile app for instructions on how to utilize the Positive Pay system, which may typically have a dedicated option within the services menu. If you require assistance, you can also visit a branch or contact customer support.

The Positive Pay System significantly enhances security but requires proactive participation from the cheque issuer. Always make sure to share the cheque details with your bank, use clear writing, and double-check all figures and names. Taking these few extra minutes can help you avoid significant potential problems later.

(The author is the DGM-Communication at BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)

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