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The RBI (Reserve Bank of India) recently announced to implement a “positive pay system” for cheques by 1st January 2021 to ensure that crucial information is verified for payments above ₹ 50,000. The main aim of RBI to announce this measure is to control banking fraud. It is a countermeasure in case of cheque frauds where the cheque leaf and signature are genuine, but the details are altered.
Some Salient Features
- It will be the account holder’s discretion to use this facility. However, in the event of cheques for ₹ 5 lakh and above, banks may consider making it compulsory.
- The cheque issuer, in accordance with the positive pay system, must submit certain minimum information such as date, name of the payee, beneficiary name, amount, electronically via SMS, mobile app, internet banking or ATM, to the drawee bank.
- The information will be verified before payment of the cheque is sent. If a discrepancy is flagged by Cheque Truncation System (CTS) to the drawee and presenting bank, measures to redress the issue will be taken immediately.
- The ‘positive pay’ facility will be developed by the NPCI (The National Payments Corporation of India) and will be made available to the banks agreeing to incorporate this measure.
- RBI has also directed the banks to make their customers aware of the characteristics of the ‘positive pay’ scheme through SMS, branch displays, ATMs and their website and internet banking.
- Cheques complying with the guidelines of ‘positive pay’ system will be accepted under the dispute resolution process at the CTS grids. However, banks can enforce similar arrangements if cheques are cleared and obtained outside the CTS.
How does the feature will work?
- Some banks like IDBI have already begun to encourage clients to use this feature. Customers can update check details through IDBI Bank GO Mobile+ app.
- The bank’s system uploads the data into the centralised Positive Pay data system after the customer shares the information of details. The bank shall verify the details from the central database after receiving the cheque. Banks will pay if the information given by the account holder matches the information provided on the cheque.
- The bank would reject the cheque in the event of a mismatch. This method makes it possible for banks to authenticate the cheque two times by matching the issuer’s signature and verifying the information provided.
- Banks also integrate many authentication measures into the cheque to verify whether or not the cheque leaf is authentic. Some measures include watermarks, logo, a pantographic image, serial number, account number, and features that can not be seen under ordinary light.
How is it beneficial to the customer?
- Avoiding fraud is the main benefit of this method. Some big banks used their system to verify such details. Now with the regulator enforcing it, small banks will also benefit from the system.
- The Positive pay system puts the onus of any fraudulent activity on banks.
- Positive Pay serves as customer insurance. If a holder of an account shares the details of the cheque issued and the bank still clears a fraudulent cheque. Then the onus of fraud is on the bank, not the customer.
To help avoid fraud losses & liability, most of the banks would charge an insurance premium fee to provide a double layer security system with the positive pay system. The system is yet not mandatory; however, you can opt for it to avoid any fraudulent activity while making cheque payments.