Positive Pay system for Cheque Transactions

A couple of years back, on a sunny day, I received a call from my banker, Canara Bank, stating that there is a mismatch in my signature on a cheque which had come for clearing! It was no surprise to me, as I had a lot of variations in my signature each time I signed. But I realized that I didn’t issue any cheque during that week!

The Manager asked me to meet him at Hudson Circle Office (where cheque clearing was done) and to my surprise, the cheque had a forged signature, and I finally discovered the mischief was done by one of our team members!

Come 1st January 2021, none of us need to be worried about such forgery! Because RBI will implement a scheme for clearing the cheques called “Positive Pay System” as per the Notification issued on 25th September 2020.

How does it work? For example –

  1. You issue a cheque of HDFC in the name of Mr. Kappanna for Rs.2,50,000
  2. Kappanna will present this cheque in ICICI bank
  3. ICICI Bank sends the cheque to HDFC for clearing

When HDFC receives the cheque, they will send you an alert that so and so cheque has come for clearing. The alerts may be sent through SMS asking you to confirm the payment by clicking a link, an automated call asking – PRESS 1 for YES, 2 for No, or through an APP, etc. National Payments Corporation of India (NPCI) shall develop the facility of Positive Pay in Cheque Truncation System (CTS) and make it available to participant banks.

They will process the payment only after getting the confirmation from you for all the payments over Rs.5,00,000. The banker may consider making this process mandatory to protect the interest of the customer. If the confirmation is not given, the banker may decline the payment.

Any cheque value between Rs.50,000 to Rs.5,00,000 can also be done through this process, but at the discretion of the customer.

For any payment value less than Rs.50,000, no confirmation will be sought. If anyone is interested in forging a cheque, they have to read this article and remember to write Rs.49,000 or less! Or else, their mission won’t be accomplished. Please spread the message!!!

I read that a similar system is in place in developed countries and also experienced with a couple private banks in India who are calling the customers before clearing the high value cheques.

According to me, this is a very good system but has come very late, as the digital world has evolved over the years and now mostly, the payments are done through net banking, apps, and intermediaries. Not many of us are in the business of writing cheques anymore! At the same time, the fraudsters have moved much faster than the Regulator and found new ways of cheating the customer or banks digitally, I think they have resigned from cheque forging business a couple of years back!! So, the banks can’t catch more rats but a foolproof process is always welcome! Better late than never!

B E Kumar Prasad

Chartered Accountant

[email protected]

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at [email protected]

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