How many times have we been haunted by news of bank frauds driven by blatant disregard for rules and ignoring basic quality checks at the cash or cheque counters? To change this, banks have introduced the positive pay system, a process that confirms the key details of high-value cheques. The Reserve Bank of India had issued guidelines informing the banks to implement the system with effect from January 01, 2021, to check against the growing number of cheque frauds incidents.
All about Positive Pay System
Developed by the National Payments Corporation of India (NPCI), the Positive Pay System (PPS) helps reconfirm the necessary details of large value cheques. Under this system, the person issuing the high-value cheque submits necessary details related to the cheque including the date, name of the person in whose name the cheque has been drawn, payee amount, etc. to the bank accepting the cheque. The cheque issuer can submit the details either through physical presence or electronic means including SMS, mobile apps, internet banking, ATM, etc. The details that must be submitted include bank account number, cheque number, the date on which the cheque was issued, amount, transaction code, beneficiary name and MICR Code of the issuing bank. The banks can then verify the details while issuing the cheques and any anomaly found would be flagged.
Limit on cheque values
As per the guidelines stipulated by the RBI, banks must enable the facility to all account holders issuing cheques equal to or more than ₹50,000. Though the availability of this facility is at the discretion of the account holder, banks may mandate the rules for those issuing cheques equal to or more than ₹5 lakh.
Some banks have also gone to the extent of informing their customers that their large-value cheques would be returned if not registered in advance. Also, account holders issuing high-value cheques must ensure that the banks provide the necessary details within the given timeframe to ensure hassle-free clearance. Also, account holders can opt for legal measures under the dispute resolution mechanism provided that the cheques are registered under the Positive Pay System. Cheque issuers would be informed via SMS if the cheques are accepted or rejected.
Importance of PPS
Many customers tend to criticize or ignore PPS misconstruing the entire process as unnecessary. However, this system now offered by most commercial banks has helped prevent crimes including forgery, altered and counterfeited cheques.
Also, the system has helped identify tricksters trying to withdraw cash using counterfeited cheques. The system also asks the company to inform it of any cheques issued by them to ensure minimal chances of fraud. The company then tells the bank whether or not to encash the cheque. The bank officials will then accordingly comply with the information shared with them by the company.