Lok Sabha Question No. 4241 (UNSTARRED), answered on 2023-03-27
Subject: Validity of e-Cheques
Ministry: FINANCE
Asked by: Dushyant Singh, Lavu Sri Krishna Devarayalu

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

## LOK SABHA UNSTARRED QUESTION NO. 4241

ANSWERED ON MONDAY, 27 th  MARCH, 2023/ CHAITRA 6, 1945 (SAKA)

## Validity of e-Cheques

## 4241.  SHRI DUSHYANT SINGH: SHRI LAVU SRI KRISHNA DEVARAYALU:

Will the Minister of FINANCE be pleased to state:

- (a) whether e-cheques are legally valid in India, if so, the details thereof;
- (b) the steps taken to discourage the use of traditional paper cheque system and promote the use of electronic alternatives;
- (c) whether any circulars have been issued to banks requesting or advising them to issue e-cheques to their users, if so, details of all the circulars;
- (d) whether the opinion of RBI was sought by the Government to amend the Negotiable Instruments Act, 1881 in 2015 to include 'e-cheques' and if so, details thereof and if not, the reasons therefor; and
- (e) the list of banks that currently issue e-cheques to their customers?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (DR. BHAGWAT KARAD)

(a) : Yes, Sir. The definition of 'cheque' is provided in Section 6 of the Negotiable Instruments Act, 1881 (NI Act). As per Section 6 of the NI Act, a 'cheque' is defined as 'a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it  includes  the  electronic  image of  a  truncated  cheque  and  a cheque  in the  electronic form'. Further, the expressions 'a cheque in the electronic form' and 'a truncated cheque' are also clarified through Explanation I to Section 6 of the NI Act. Explanation I provides that 'a  cheque  in  the  electronic  form'  means  a  cheque  drawn  in  electronic  form  by  using  any computer  resource  and  signed  in  a  secure  system  with  digital  signature  (with  or  without biometrics signature) and asymmetric crypto system or with electronic signature, as the case may be' and 'a truncated cheque' means a cheque which is truncated during the course of a clearing  cycle,  either  by  the  clearing  house  or  by  the  bank  whether  paying  or  receiving payment, immediately on generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing.

(b)  and  (c) :  The  Cheque  Truncation  System  (CTS)  for  clearing  cheques,  which  was introduced by the  Reserve Bank of India (RBI),  is  operational  pan-India.  Truncation  is  the process of stopping the flow of the physical cheque issued by a drawer at some point by the presenting bank en-route to the paying bank branch. In its place, an electronic image of the cheque is transmitted to the paying branch through the clearing house, along with relevant information like data on the MICR band, date of presentation, presenting bank, etc. Cheque truncation thus obviates the need to move the physical instruments across bank branches. This eliminates the associated cost of movement of the physical cheques, reduces the time required for their collection and brings elegance to the entire activity of cheque processing. RBI's directives on Standardisation and Enhancement of Security Features in Cheque Forms known as CTS-2010 were issued vide RBI's Circulars No. RBI/2009-2010/323 DPSS.CO.CHD.No.  1832  /  04.07.05  /  2009-10  dated  22.02.2010  and  No.  RBI/20092010/503 DPSS.CO.CHD.No. 2806 / 04.07.05 / 2009-10 dated 22.06.2010.

(d) :  Yes,  Sir.  Clause  (a)  of  Explanation  I  to  Section  6  of  the  NI  Act,  which  clarifies  the meaning of the expression  'a  cheque  in  the  electronic  form',  was  substituted  through  the Negotiable  Instruments  (Amendment)  Act,  2015  with  effect  from  15.06.2015.  The  new Explanation of the expression 'a cheque in the electronic form' was substituted for the prior existing Explanation as per the opinion of RBI. RBI had recommended an amendment to the earlier Explanation in the interests of legal certainty.

(e) :  RBI's  directives  and  Circulars  are  applicable  to  all  Scheduled  Commercial  Banks including Regional Rural Banks (RRBs) as well as Cooperative Banks.

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