RBI’s ‘Positive Pay’ Feature To Secure Cheque Payments

To secure cheque payments, the Reserve Bank of India (RBI) has introduced the Positive Pay mechanism. Positive Pay is a cash-management service which is automated. It is employed to prevent cheque fraud. Any cheque which seems to be suspicious will be sent back to the issuer for examination. The Positive Pay mechanism acts like insurance for a company by saving it from losses, fraud, and other liabilities; it will also make cheque payments safer. 

An issuer can send all his/her details to the bank due to which the clearance of cheques happens faster. The Positive Pay system will apply to cheques valuing Rs 50,000 and above. Every cheque will be processed according to the information given by an account holder at the time of issuing the cheque. As per the central regulator, this initiative is expected to cover 20% of total cheque transactions by volume and 80% by value.

Understanding the ‘Positive Pay’ Feature in Detail

The Positive Pay mechanism works by making sure that every cheque that is valued at Rs 50,000 and above is verified with the details rendered by an issuing party or an individual. Only when there is a match, it will result in a drawee’s bank clearing the cheque. In case it is a ‘no match’ scenario, the cheque issuer will be contacted for further verification.

Under this new system, an account holder will need to electronically upload the details of cheque via a bank’s net banking system.

A customer will need to enter the cheque number, date of issuance, account number, payee name, amount payable, and the image of the front and backside of cheque on the Positive Pay system. Later, the cheque can be given to the concerned beneficiary.

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The cheque is then submitted at the beneficiary’s bank for encashment and forwarded to the drawee’s bank for clearance. The drawee bank will then compare the information mentioned on the cheque, along with the information provided online by a customer via the Positive Pay system. In case all the details match, the cheque will be honoured.

How Will This New Feature Benefit?

  • It will reduce or eliminate the potential for altered or fraudulent cheques.
  • Cheques having an encoding error cannot be encashed; thereby safeguards high-value cheque transactions.
  • It renders multiple layers of security.
  • Banks no longer need to contact customers to seek confirmation if they issued a high-value cheque that has come up for payment at a customer’s bank’s clearance branch.
  • Cheque frauds such as counterfeiting, altering, and forging of the financial instruments can be avoided.

RBI will soon be releasing the guidelines for the Positive Pay system. The participating banks, as well as customers, will need to adhere to the guidelines. RBI Governor, Shashikanta Das, also mentioned that an Innovation Hub would be set up in India for promoting innovation within the financial sector.

A scheme comprising offline retail payments with the help of cards and mobile devices; Online Dispute Resolution (ODR) mechanism concerning digital payments also will be introduced soon.

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in

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