Cheque Bounce Meaning, It’s Consequences & Much More!

Fined for a dishonoured cheque? Time to go digital
 
With the advent of the digital payment system, life has become easier for most of us. Banking transactions are simpler and faster. Yet, cheques have continued to be a preferred mode of financial transactions for many.
 
For years, cheques have been considered a safe mode of transferring funds and making purchases. However, with the use of cheques, comes the risk of a ‘bounce’ or ‘dishonour’. The risk entails fines, penalties, and even imprisonment.
 
What is a dishonoured cheque?
 
A cheque is usually a written commitment made by the payer to the payee against a sum of money. The payee, also known as the drawee, deposits this cheque in the bank. In an ideal situation, the payer’s bank transfers the funds from the payer’s account to the payee.
 
However, there are times when the payer’s bank or the payee’s bank refuses to honour this commitment. The reasons for this ‘decline’ may vary. In such a case, the cheque bounces and is called a ‘dishonoured cheque’.
 
A cheque can be dishonoured for a host of reasons. It could be because the issuer of the cheque did not have sufficient balance in the account or the signature on the cheque did not match exactly. At times, cheques are dishonoured if account numbers fail to match. Disfigured and damaged cheques may also be dishonoured by the bank.
 
A cheque may bounce if it has expired or if there is a problem with the date of issuing it. Sometimes, the issuer may choose to stop the payment. In that case, too, the cheque is considered as dishonoured. There could be various other reasons for a bank to dishonour a cheque.
 
What are the consequences of dishonoured cheque?
 
A dishonoured cheque attracts penalty on the issuer of the cheque. It depends on the reason for the bounce.
 
If a cheque is dishonoured because funds in the payer’s account were insufficient, it is a criminal offence under the Negotiable Instruments Act of 1881. The payer may be prosecuted for issuing a cheque against an account with insufficient funds. The payee may choose to prosecute the payer or allow the payer to re-issue a cheque within three months. The payer may end up in jail for up to two years for issuing a dishonoured cheque.
 
Apart from this, banks also charge penalty for dishonour of cheque. The penalty varies from bank to bank. Banks may have different penalty slabs for the amounts for which a dishonoured cheque is issued.
 
Go digital, avoid cheque dishonour charges
 
An efficient way of avoiding cheque dishonour charges is to bank digitally. Instead of issuing a cheque, choose to transfer funds online. Use NetBanking or Mobile Banking to transfer funds to third-party accounts. You can also make transfers within your accounts using the digital payment system. Click here to get started.
 
If you have to issue a cheque, here are a few things to keep in mind;
 
1. Make sure you issue an account payee cheque.
2. Use the signature that is registered with the bank.
3. Ensure that there is sufficient balance in your account.
4. Fill in details on the cheque carefully.

Click here to know further about dishonoured cheques.