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  • Raghav Sand

Positive Pay: New Safety Feature for High Value Cheques

The Reserve Bank of India (RBI) in its ‘Statement on Developmental and Regulatory Policies’, published in August 2020 talked about positive pay mechanism for cheques. Subsequently, in September 2020, operational guidelines were issued for the same and the new system will be implemented from January 01, 2021.

The cheque truncation system (CTS) for clearing cheques is operational pan-India and presently covers two per cent and fifteen per cent of total retail payments in terms of volume and value, respectively. The average value of a cheque cleared in CTS presently is ₹82,000. Cheque truncation removes the need to move the physical instruments across bank branches, other than in exceptional circumstances for clearing purposes. This effectively eliminates the associated cost of movement of the physical cheques and reduces the time required for their processing.

The CTS-2010 standard specifying minimum security features on cheque leaves as a deterrent against cheque frauds, while standardisation of field placements on cheque forms enables straight-through processing by use of optical / image character recognition technology. Entire cheque volume in the country which was earlier cleared through 66 MICR Cheque Processing locations is consolidated into the three grids in New Delhi, Chennai and Mumbai.

To further augment customer safety in cheque payments and reduce instances of fraud occurring on account of tampering of cheque leaves, RBI has decided to introduce the mechanism of positive pay for all cheques of value ₹50,000 and above. Under this mechanism, cheques will be processed for payment by the drawee bank based on the information passed on by its customer at the time of issuance of cheque. This measure will cover approximately 20 per cent and 80 per cent of the total cheques issued in India by volume and value, respectively.

Process of Positive Pay

The concept of positive pay involves a process of reconfirming key details of large value cheques. Under this process, the issuer of the cheque submits electronically, through channels like SMS, mobile banking application, internet banking, ATM etc., certain minimum details of that cheque (like date, name of the beneficiary / payee, amount etc.) to the drawee bank. These details are cross checked with the presented cheque by CTS. Any discrepancy is flagged by CTS to the drawee bank and presenting bank, who will take redressal measures.

Discretionary Mechanism

National Payments Corporation of India is developing the facility of positive pay in CTS and shall make it available to participant banks. Banks, in turn, shall enable the service for account holders issuing cheques for amounts of ₹50,000 and above. Availing the facility of positive pay is at the discretion of the account holder, while banks may consider to make it mandatory in case of cheques for amounts of ₹5,00,000 and above.

Eligibility for Dispute Resolution

Only those cheques which are compliant with the positive pay mechanism will be accepted under dispute resolution mechanism at the CTS grids. Banks may implement similar arrangements for cheques cleared / collected outside CTS as well (e.g., post-dated cheques).

Awareness for Adoption

In the coming days / weeks, banks will create awareness among their customers about the features of positive pay system through SMS alerts, display in branches, ATMs, as well as through their website and internet banking.

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