Banking regulator Reserve Bank of India (RBI) has decided to ring in the New Year with additional protection for your high-value cheques. From January 1, 2021, a new concept of Positive Pay System for Cheque Truncation System (CTS) will be introduced, seeking to further augment customer safety in cheque payments.
So how does Positive Pay work?
Well, the concept of Positive Pay involves a process of reconfirming key details of large-value cheques. Under this process, the issuer of the cheque submits electronically, through channels like SMS, mobile app, Internet banking and ATM, certain minimum details of that cheque (like date, name of the beneficiary/payee, and amount) to the drawee bank, the details of which are cross-checked with the presented cheque by CTS. This will have to be done before handing over the cheque to the beneficiary.
Put simply, cheques will be processed for payment by the drawee bank based on information passed on by its customer at the time of issuance of cheque. When the beneficiary submits the cheque for encashment, the cheque details are compared with the details provided to the drawee bank through Positive Pay. If the details match, the cheque is honoured. In case of mismatch in cheque details, the discrepancy is flagged by CTS to the drawee bank and the presenting bank, which would take redress measures.
Will Positive Pay facility be available for cheques of any amount?
After the National Payments Corporation of India ( NPCI) develops the facility of Positive Pay in CTS and makes it available to participant banks, the banks in turn would have to enable it for all account-holders issuing cheques for amounts of ₹50,000 and above. While availing of this facility is at the discretion of the account-holder, banks may consider making it mandatory in case of cheques for amounts of ₹5 lakh and above, the RBI had said.
How big is the coverage of Positive Pay going to be?
Well, this measure is expected to cover around 20 per cent and 80 per cent of total cheques issued in the country by volume and value, respectively. Currently, the CTS for clearing cheques is operational pan-India and covers 2 per cent and 15 per cent of total retail payments in terms of volume and value respectively.
So where is the comfort for those issuing high-value cheques?
Under the Positive Pay system, the drawee bank is already aware from the issuer the details of the high-value cheque (above ₹50,000) he has issued. Without this intimation if a cheque gets presented, then the drawee bank can reject payment and examine the case. Positive Pay is going to benefit both the issuer and the beneficiary. For the issuer, the benefit from this concept is that there cannot be fraudulent cheques encashed out of issuer’s account. For the beneficiary, the benefit is that the cheques handed out to him will mostly get honoured.
Is Positive Pay the same as ‘certified cheque’ — old wine in a new bottle?
No no…The concept of ‘certified cheque’ was there long back — about 30 years back, long before technology swept across the Indian banking landscape. Whenever anybody issued a cheque, banks used to certify that money is there in their customer’s bank account and, therefore, the cheque will get honoured. This provided comfort to beneficiary that cheque payment will get honoured and therefore did not insist on a pay order or demand draft.
Drawee banks used to earmark the amount in the account of the issuer and then certify the cheque. This was adopted in an era when the cheque instrument used to travel physically for clearing. However, in the current era of cheque truncation system, there is no need for the cheque to physically travel for clearance. Only images of cheques travel digitally in the current CTS era! Positive Pay will only have positive effect on giving that added protection to India’s digital payment aspirations.
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