Lok Sabha Question No. 1622 (UNSTARRED), answered on 2017-03-10
Subject: Cheque Dishonour Cases
Ministry: FINANCE
Asked by: M. UDHAYAKUMAR

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA

## UNSTARRED QUESTION NO. 1622 TO BE ANSWERED ON FRIDAY, MARCH 10, 2017/PHALGUNA 19, 1938 (SAKA) CHEQUE DISHONOUR CASES

## 1622. ADV. M. UDHAYAKUMAR:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Reserve Bank of India (RBI) eases norms in cheque dishonour cases of Rs.1 crore and above and if so, the details thereof;
- (b) whether the banks are not allowed to issue fresh cheque books in the vent of cheque dishonour  valuing  Rs.1  crore  and  above  on  four  occasions  during  a  financial  year  for want of sufficient funds and if so, the details thereof;
- (c) whether the RBI has left it to the lenders discretion to issue fresh cheque books; and
- (d) if so, the details thereof?

## ANSWER THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI SANTOSH KUMAR GANGWAR)

(a)  to  (d): The  Reserve  Bank  of  India  (RBI)  vide  circular  dated  26.06.2003  entitled 'Dishonour of Cheques - Procedure thereof' has issued instructions regarding dishonour of cheques  valuing  more  than  Rs.  1  Crore.  As  regards  dealing  with  incidence  of  frequent dishonour of cheques the circular states that:

- (i) With a view to enforce financial discipline among the customers, banks should introduce a condition for operation of accounts with cheque facility that in the event of dishonour of a  cheque  valuing  rupees  one  crore  and  above  drawn  on  a  particular  account  of  the drawer  on  four  occasions  during  the  financial  year  for  want  of  sufficient  funds  in  the account, no fresh cheque book would be issued. Also, the bank may consider closing current  account  at  its  discretion.  However,  in  respect  of  advances  accounts  such  as cash credit account, overdraft account, the need for continuance or otherwise of these credit facilities and the cheque facility relating to these accounts should be reviewed by appropriate authority higher than the sanctioning authority.
- (ii) For the purposes of introduction of the condition mentioned at (i) above in relation to operation of the existing accounts, banks may, at the time of issuing new cheque book, issue a letter advising the constituents of the new condition.
- (iii) If a cheque is dishonoured for a third time on a particular account of the drawer during the financial year, banks should issue a cautionary advice to the concerned constituent drawing  his  attention  to  aforesaid  condition  and  consequential  stoppage  of  cheque facility  in  the  event  of  cheque  being  dishonoured  on  fourth  occasion  on  the  same account  during  the  financial  year.  Similar  cautionary  advice  may  be  issued  if  a  bank intends to close the account.

Subsequently, the instructions were reviewed and revised instructions were issued vide RBI's circular  dated  04.08.2016  entitled  'Dishonour  of  cheques  -  Modification  in  procedure' wherein  it  has  been  decided  to  leave  it  to  the  discretion  of  the  banks  to  determine  their response to dishonour of cheques of the account holders. Banks have been advised to put in place an appropriate policy approved by the Board or its Committee taking into consideration the need to prevent misuse of the cheque drawing facility and avoid penalising customers for unintended dishonour of cheques.