Srinagar, Jan 01: Earlier this week, India’s largest lender State Bank of India announced via Twitter that it will be implementing the RBI’s positive pay system for cheque transactions from the turn of the year. In September last year, the RBI issued guidelines around the system, noting that it will be made available on a voluntary basis for customers making cheque transactions over Rs 50,000 and up to Rs 5 lakh. The central bank also left it to banks to decide if they wanted to make the system mandatory for any cheque transaction exceeding Rs 5 lakh.
Simply put, the aim of the positive pay system is to deter cheque frauds occurring through the modification, counterfeiting and forging of cheques. Implementation of the system will mean that banks will no longer need to contact customers to confirm whether they have issued a high-value cheque when it arrives at the beneficiary’s branch for clearance.
Under the new system, the issuer of the cheque is required to reconfirm specific details of a cheque like the date, name of the beneficiary, or payee, and amount through digital channels like SMS, net-banking platforms, lenders’ mobile app or ATMs. These details are then cross-checked with the original cheque via the Cheque Truncation System (CTS). Only when a match is confirmed, will the cheque be honoured. In the event that a mismatch occurs, the bank will contact the issuing individual or institution for verification, withdrawal or cancellation of the cheque.
The RBI had directed the National Payments Corporation of India to make a facility available to Indian lenders by which they can link directly to the CTS to verify data quicker.
The positive pay system mandates that the issuer of cheque i.e. the account holder electronically uploads details of the cheque. As such, there is reason to believe it will largely be employed by corporations with the average retail account holder likely to find it quite troublesome.
What’s more, the RBI’s monthly bulletin in October revealed that the relevance of cheque transactions is waning in the country. According to the central bank’s data, 6.43 crore paper-based transactions worth Rs 5,241 crore took place on the CTS in October. In the same month last year, this figure stood at 8.97 crore valued at Rs 6,591 crore. Meanwhile, the bulletin recorded that 27 crore NEFT transactions worth in excess of Rs 23,500 crore and 1.36 crore RTGS transactions worth over Rs 72,000 crore took place in October 2020.
Other data released by the central bank also indicates that cheque fraud no longer makes up a significant part of cumulative bank fraud in the country. In its latest issue of Report on Trend and Progress of Banking in India, the RBI reported 202 cases of cheque fraud worth Rs 39 crore for the year ended March 2020. During the period between April and September in the current year, the central bank recorded 76 cases worth Rs 48 crore. The total value of bank fraud in the previous financial year was pegged at Rs 1.13 lakh crore. Between the April-September 2020 period, this figure stood at Rs 64,681 crore.