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What is Cheque Bounce?


A Cheque is a negotiable instrument that instructs a financial institution to pay a specified sum of amount from a specified transactional account held in the drawer's name with that financial institution. In other words, it acts as a promissory note used to transfer money in a physical form from one account to another.


Cheque plays a very important role in the financial systems across the globe. It is considered as one of the most important documents which any individual or a company or a firm or a government can use to conduct financial transactions.

What is Cheque Bounce?

But one has to take care, that enough funds are parked in the account, before issuing a cheque for a hassle-free money transfer. Transfer of money using cheque is considered as one of the safest and transparent ways of steering business, as an entry will be made against the issue of cheque from a particular bank which can be tracked in future whenever the need arises.

What is Cheque Bounce?

A cheque bounce can happen due to several reasons like insufficient funds in the account, expiry of the validity period of an issued cheque, the date mentioned on the cheque, signature mismatch, difference in the amount mentioned in words and numbers, overwriting in the cheque, a damaged cheque.


Here the cheque bounce is a term used to elaborate the unsuccessful processing of a dispensed cheque due to various reasons as mentioned above. One of the general reasons for the cheque bounce case is insufficient funds in the issuer's account. In such a case, the banks will return or dishonour the cheques and in addition to it, they will charge a particular fee as cheque bounce charges.

Passage of bad cheques is illegal and is considered a crime that can be aggravated based on the amount.

What happens after a Cheque Bounces?

Once the cheque bounces, the respective bank will levy a particular fee on the issuer. Generally, the cheque bounce charges levied on the customer will differ from one bank to another. In a few of the cases, the beneficiary or the payee also will have to bear the measures of a charge.

For Example, Mr Ananth writes a cheque to Mr Subbu a cheque of Rs 1,00,000 and the cheque bounces. Mr Subbu may reserve the right to redeposit the cheque along with the bounced cheque fee.

Once the cheque bounce case occurs, there will be negative reports with financial bureaus which may make it difficult for the consumers to open savings and current account going forward.

Reasons for Cheque Bounce

There are several reasons for cheque bounce cases to occur, let us understand each of them in brief.

Insufficient Funds

If there are insufficient funds in the account from which a cheque is issued, there are high chances for the cheque to get bounced. If an individual or a firm has issued a cheque, that holds less amount than the one written on the cheque, then the bank will not be able to process the cheque. The bank will cancel the payment and dishonour the cheque.

The bank will charge a fee on both the parties - issuer and depositor.

Hence it is mandatory to always issue a cheque after ensuring an appropriate balance in the account.

Mismatch of Signature

The mismatch of signature of the issuing party is also one of the common reasons for cheque bounce. If the signature of the issuer does not match with the ones held in the bank's record, then the cheque will be considered as a bounced cheque.

Signature plays a very prominent role while writing a cheque, hence one has to be careful to put the right signature with the one that tallies the one in the bank records.

Damaged Cheque

It is essential to make sure that the cheque is not damaged or disfigured at the time of issuing to the drawee or presenting it to the teller. Most of the banks in India do not entertain a damaged cheque wherein the details are not visible. If in case, there are too many stains or marks, then it will be tagged as bounced cheque.

Read more about: cheque bank
Story first published: Monday, April 19, 2021, 20:09 [IST]
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