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Cheque Bounce Charges

Cheque Dishonoured

Last Updated 27th Jan 2022

  • Cheque bounce occurs when banks refuse to honour the cheque due to various reasons such as insufficient funds in the payer’s account, signature mismatch, discrepancies in payee details, etc.
  • Cheque bounce is a non-cognizable and bailable offence under section 138 of Negotiable Instruments Act, 1881.
  • In a cheque bounce case, the cheque issuer may face imprisonment up to 2 years or monetary penalty under section 138 of the Negotiable Instruments Act.
  • Cheque bounce penalty charges vary from bank to bank ranging from ₹ 50 to up to ₹ 750.
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What is a Cheque?

Before the advent of the modern banking system with digital payments, individuals used to collect money and transfer it with a cheque from their bank accounts. If you open a bank account, you are given a cheque book along with other things, like a passbook, a debit card, etc. A payment to an individual or organization through cheque is a written order to the bank to pay the mentioned amount to an entity or a person whose particulars are given on the cheque. Writing a cheque is simple, but you must pay attention to specific points before issuing a cheque to avoid making an error that may cause a cheque to bounce.

What is Cheque Bounce or Cheque Dishonoured?

A cheque is a formal promise made against a sum of money by the payer to the payee. Ideally, the bank of the payer transfers money from the account of the payer to the payee.

To make payments to an individual or an organisation, a drawer has to issue a cheque. It is a written undertaking by the drawer to the drawee for paying the money. When a bank refuses to honour this pledge for various reasons, then the words "Cheque Bounce" or "Dishonoured Cheque" are employed.

There are multiple reasons due to which a cheque may be dishonoured. It could be that there are no sufficient funds available in the cheque issuer's account or other details did not match. Sometimes, if the account numbers do not match, cheques bounce. The bank will even dishonour faulty and damaged cheques.

A cheque will bounce if it has crossed its expiry date. At times, the cheque may put a stop to the payment. The cheque is, therefore, dishonoured in this situation.

Possible Reasons for Cheque Bounce

A bank may refuse to make payments for the cheque for different reasons. The reasons are:-

  • Inadequate funds in the payer's account
  • Failure in signature verification
  • A discrepancy in the account number or amount
  • An issue with the cheque date
  • Damaged cheque leaf
  • Crossing overdraft limit
  • Overwriting, scribbling on the cheque leaf
  • Expired cheque
  • The account of the drawer is locked
  • Payment by the drawer is prevented
  • In case of drawer's death or insanity
  • The company's seal is not available on the cheque
  • Suspected cheque

What happens if a cheque is dishonoured?

The issuer of this cheque will have to pay the penalty on the dishonoured cheque depending on the bounce reason.

When a cheque is dishonoured due to inadequate funds, this becomes a criminal offence as per the Negotiable Instruments Act, 1881. The payer has to pay charges with issuing a cheque against an account with insufficient funds. In three months, the payee may prosecute the payer or allow the payer to reissue a cheque. The payer may have to face imprisonment up to 2 years for issuing a dishonourable cheque.

Also, the banks will levy penalty charges for cheque dishonour. The penalty varies between banks. Banks may have different penalty brackets for the sums of the issued dishonoured cheque.

Punishments and Cheque Bounce Charges in India

The penalty and other charges for cheque bounce charges of some of the top banks in India are:

Bank NamePenalty Charges (+ GST applicable)
State Bank of India (SBI)
  • Unpaid by others Amount up to ₹ 1 Lakh - ₹ 150 Above ₹ 1,00,000 - ₹ 250/-
  • For insufficient funds only ₹ 500/-
  • For technical reasons - ₹ 150/-
ICICI bank
  • Cheque Return Outward (financial reason) - ₹ 200 per instance
  • Cheque Return Inward - ₹ 500 per instance
  • ₹ 50 for non-financial reasons leaving signature verification.
  • Outstation cheque - ₹ 150 plus other bank charges applicable.
Axis Bank
  • Outward Cheque Return - ₹ 200/ cheque
  • Inward Cheque Return (Financial Reason)- ₹ 500/ per instance.
  • Inward Cheque Return (Non-Financial) - ₹ 50 Flat per instance
  • Outstation Cheque Return - ₹ 150 per cheque
Bank of Baroda Inward Return
  • Up to ₹ 1 Lakh – ₹ 125/-
  • Above ₹ 1 Lakh to less than ₹ 1 Cr – ₹ 250/-
  • Above ₹ 1 Cr – ₹ 500/-
Outward Return (Financial Reason)
  • Up to ₹ 1 Lakh – ₹ 250/-
  • Above ₹ 1 Lakh to less than ₹ 1 Cr – ₹ 500/-
  • For ₹ 1 Cr and above – ₹ 750 per instrument
  • For other reasons – ₹ 250/-
HDFC Bank₹ 550 + GST

What are the legal actions for Cheque Dishonoured in India?

If the payee wishes to take legal action, then the drawer has an immediate opportunity to pay the sum. To make that happen, within 30 days after the payee receives from the bank a "cheque return memo," the payee has to send a notice to the drawer since the date the payee. The notice shall mean that, within 15 days of receiving the notification, the amount shall be paid to the payee.

If within 30 days of getting the notice, the drawer fails to pay money to the payee, he/she has the full right to file a criminal complaint against the cheque issuer under Negotiable Instruments Act, 1881. However, within a month from the notice period's expiry, the allegation or investigation should be reported in the court of a magistrate.

Once the lawsuit is filed, the court shall begin the case with the required papers. If the drawer is found guilty, the person may have to spend up to two years in prison or pay the penalty of two times the cheque sum, as per Section 138 of the Negotiable Instruments Act, 1881. Moreover, the banks often have the right to freeze the account or the culprit's cheque book (in case of the habitual offender).


What should I do if my cheque is bounced?

The payee has the legal right to lodge a criminal complaint if the cheque issuer has not made a fresh deposit within 30 days of notice under section 138. Within a month of the notice date expiration, the payee should register a complaint with a magistrate court.

Can I file FIR for Cheque bounce?

Yes, you can register an FIR against the person who has issued the cheque for cheque bounce case in a local police station.

What is the punishment for Section 138?

Under section 138, there is a provision of two years of imprisonment or penalty if the cheque is dishonoured for insufficient money in the account.

What happens if a business Cheque bounces?

Under Section 138, the consequences of a business cheque bounce are similar to the regular cheques. If convicted, then the punishment for business cheque bounce is jail term up to 2 years, and penalty.

Are there any charges for cheque bounce?

Yes, for every instance of cheque bounce, the banks charge accordingly as per their rules. These charges vary from ₹50 to ₹750 depending on the bank.

What is the new rule of Cheque bounce?

If the payee is willing to take legal action for the cheque bounce, then the cheque issuer can face imprisonment for maximum up to 2 years or fine (as per the amount).

Is cheque bounce a non-bailable Offence in India?

Under section 138, cheque bounce is a non-cognizable and bailable offence.

How many times can a cheque bounce?

A cheque can be bounced any number of times within its validity period until and unless the payee or the recipient takes legal action.

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