Cheque Bounce

A situation of cheque bounce is basically a term used to define the unsuccessful processing of a dispensed cheque due to several reasons. Non-sufficient funds (NSF) in the issuer’s account is one of the primary reasons for a bounced cheque. The banks return or dishonour the cheques, also known as rubber checks, in addition to imposing a particular charge. Further, the passing of bad cheques can be illegal, and this crime can be aggravated depending on the amount and whether this action involves crossing state boundaries.

It is important to know that bank fee is only a single aspect in case of a cheque bounce. In several cases, the beneficiary/payee also measures a charge. For example, if in a situation a person writes a check to the electronic store and the check bounces, then the store may reserve the right to redeposit that cheque along with a bounced cheque fee. Further, negative reports with financial bureaus can make it difficult for consumers to open savings and current accounts in the future.

There are instances when the issuer isn’t actually aware of the reason why the cheque is dishonoured by the bank. Hence, we have focused on some of the major and underlined reasons of cheque bounce that should be avoided.

Insufficient Funds

• If your account lacks funds from which the cheque is issued, then there is a high chance for the cheque resulting to bounce. Also, if you have issued or have received a cheque connected to an account which holds less money than the amount written on the cheque, then the bank wouldn’t be able to process the full amount and hence will curb the payment and dishonour the cheque.
• Considering this scenario, the bank will levy a nominal penalty imposed on both the parties – the issuer as well as the depositor. Later, the issuer has an option to either issue a new cheque or resolve the trouble with the receiver/depositor of the cheque. Moreover, the receiver of the cheque also holds an option to start a legal action against the issuer for non-payment and cheque dishonour. Therefore, it is advised be stay alert and careful while issuing a cheque and ensure an appropriate balance in the account.

 Date Mentioned on Cheques

• The date is a vital part of the cheque and any sort of difference or problem with the date would end in your cheque being bounced. Most people consider it as a small factor but can cause serious issues with your cheque not getting processed. The typical problems which an issuer can face regarding the cheque date mainly include disfigured or scribbled numbers.
• Also, in case the date has expiredon the cheque, then it surely gets dishonoured. In other words, if the date on the cheque is 3 months old from the present date, then the bank can bounce the cheque.

Signature Mismatch

It is a common reason for cheque bounce that is experienced by many people across India. If the signature is mismatched or doesn’t actually match with the bank’s records, then the issued cheque will be tagged as a bounced cheque. It is important to regard the signature as a prominent aspect while writing a cheque. Also, if the issuer by chance signs on the MICR Band present on the cheque, then in this situation the bank would once again disrepute the cheque.

Difference in Amount Mentioned in Numbers & Words

Suppose your cheque highlights a difference in the amount payable written in words and in numbers, then the concerned bank will bounce that cheque. Further, if the amount mentioned in the words section consists any numeric value, the amount in figures/numbers column includes any alphabet, then it can directly cause the cheque to bounce.

 Damaged Cheque

Whenever you handle a cheque, make sure that it isn’t damaged or disfigured. Why? The various banks across India do not entertain disfigured cheques on which the details aren’t clearly visible. Moreover, if your cheque has too many stains or marks, then that cheque will bounce.

Overwriting on Cheque

Any type of scribbling, correction or overwriting on a cheque is not acceptable. Such a cheque would be dishonoured immediately. It is always safe to issue a fresh cheque if any mistake occurs while filling the previous cheque. Also, do not receive a cheque with mistakes, always demand a newly written cheque.

• Bad Impact on your CIBIL score: A bounced cheque can surely hamper your financial credit history. A single cheque bounce scenario can shake your CIBIL score irreparably to such a level that you can be deprived of a loan. Hence, the smartest way to keep your CIBIL score active is to make sure your cheques are never defiled and your account possesses sufficient balance.
• Other Risks: According to the guidelines issued by RBI, a bank can restrict the issuing of a cheque book to any customer who is booked repeatedly for the offense of cheque bounce. The maximum chances offered to a customer are four times on cheques valued above a mark of Rs 1 crore. Further, if you have preserved any collateral security with the bank for a particular loan and if the repayment EMI cheque bounces, then the bank is offered the right to issue a legal notice or can even deduct money from your active account.