What is Positive Pay System for Cheque payment?

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RBI recently introduced the Positive Pay System for Cheque feature for your cheque payment. This will be effective from 1st January 2021.

But first, what is Positive Pay System for cheques?

What is Positive Pay System for Cheques
What is Positive Pay System for Cheques

When you write a cheque, then there are three parties involved.

One is a DRAWER. The second is the DRAWEE BANK. And the third is the PAYEE.

Let me give you an example. Assume that you have a bank account with HDFC Bank. If you are writing a cheque to your friend, then:

Drawer – YOU. That means a person who is writing the cheque and having the authority to write and sign on it.

Drawee Bank – HDFC Bank. Means a Bank from which the fund is disbursed to the payee. Suppose you have a bank account with HDFC Bank and you are writing a cheque to your friend, then you are considered as Drawer and HDFC Bank as Drawee Bank.

Payee – Your friend means a person who will get the money.

What is Positive Pay System for Cheque Payment?

The concept of a Positive Pay System for Cheque means a process of reconfirming key details of large value cheques.

Under this process, the issuer of the cheque (YOU) submits electronically, through channels like SMS, mobile app, internet banking, ATM, etc., certain minimum details of that cheque (like date, name of the beneficiary/payee, amount, etc.) to the drawee bank (YOUR BANK), details of which are cross-checked with the presented cheque by CTS.

Any discrepancy is flagged by CTS to the drawee bank and presenting bank, who would take redressal measures.

National Payments Corporation of India (NPCI) will develop the facility of Positive Pay in CTS and make it available to participant banks.

Banks, in turn, will enable it for all account holders issuing cheques for amounts of Rs.50,000 and above.

Availing of this facility is at the discretion of the account holder. However, banks may consider making it mandatory in case of cheques for amounts of Rs.5,00,000 and above.

Also Watch: RBI introduces a new feature in cheques from January 1, 2021.

Conclusion

I think this is the best move by RBI to cross verify the Payee details if you are issuing the high valued cheque.

However, I feel the amount of Rs.50,000 should be increased. How the banks will implement this facility is the question mark. Let us hope for the best 🙂

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Basu Nivesh

Basu Nivesh

Basav is a SEBI Registered Investment Adviser (SEBI RIA) practicing the Fee-Only Financial Planning Service. He is a CFP (Certified Financial Planner) and blogger at Basu Nivesh. He services around 300+ satisfied clients.
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