Positive Pay System
High value bank cheque transactions are set to become safer with the Reserve Bank of India’s (RBI) stated intention to adopt the Positive Pay system for the payment of cheques valuing Rs 50,000 and above.
What is it?
- The move is aimed to end cheque frauds including altering, counterfeiting and forging of the financial instruments and it is likely to do away with the need for banks to call customers to confirm if they indeed issued a high value cheque that comes up for payment at the customer’s bank’s clearance branch.
- The move announced by the RBI is likely to cover 20 percent of total cheques by volume and 80 percent by value, according to the central regulator, which announced the scheme earlier this month.
How does it work?
- The system works by ensuring that every high value cheque valued at Rs 50,000 and above is crossed checked with details provided by the issuing party or the individual.
- Only a match will lead to the drawee’s bank clearing the cheque and in the event of a ‘no match’ scenario, the issuing authority/individual will be contacted for verification, cancellation or withdrawal of the cheque.
- The Positive Pay system demands that an account holder electronically uploads the details of the high value cheque through the bank’s net banking system.
- Customers will need to put in a cheque number, issuance date, payee name, account number, amount payable along with an image of the front and reverse side of the instrument on the Positive Pay system. The cheque can then be handed over to the beneficiary.
- In the next stage, the cheque is submitted for encashment to the beneficiary’s bank and forwarded to the clearing branch of the drawee bank. The drawee bank then compares the details mentioned on the cheque with the details provided online by the customer through the Positive Pay system. If the details match, the cheque is honoured.