Cheque is a negotiable instrument which can be transferred by endorsement. Before issuing a cheque one needs to be very cautious and careful by ensuring sufficient funds and confirming proper signature.
It may so happen if you have opted for an EMI for a loan and in case there is delay in your salary and you don't notice there aren't enough funds in your account your cheque could bounce. Repeated bouncing of cheque can lead to serious action. However, you need to pay penalty as well as delay charges to bank.
Here are few reasons why a cheque could bounce?
First and foremost is insufficient funds in the account of the issuer. The cheque returned are called dishonored or bounced cheques. In such cases banks do penalize both persons for outward and inward return cheque. While, this is also applicable on payment through electronic fund transfer.
Cheque may also get bounced due to technical issue as cheque truncation system, which has many security features like torn or mutilated cheque which are not accepted.
Other reasons could be:
1. Payment stopped by issuer
2. Account closed
3. Mismatch in account number: If there is mismatch in single number in the account or name mismatch cheque gets rejected
4. Alteration done without signature: In case of alteration done and there is no counter signature.
5. Cheque presented after validity, as of now validity of cheque is 3 months.
6. Garnishee order on account: If there is legal order on account.