The dishonour of an issued cheque or "cheque bounce" is when a cheque presented at the bank cannot be processed for various reasons. Before we go to the penalty charged by most popular Indian banks, let's look at the common reasons for a cheque bounce and why you should not take writing a cheque lightly.
- Insufficient funds: It is common knowledge that if the bank account linked to cheque issued has an amount less than that written on the cheque, it will be dishonoured. Banks charge a non-sufficient funds (NSF) charge in such a situation. This could happen if one writes a cheque before receiving the expected payment. Make sure to look at the latest bank balance before writing a cheque.
- Signature mismatch: If the signature on the cheque does not match the one on the bank's record, it will be dishonoured.
- Wrong date: This could happen during the start of a new year where you make the mistake of writing the previous year instead of the current year, out of habit, in the space provided for the date. The date on the cheque should not be older than three months from the current date. If the date is disfigured or the writing is not legible, the cheque will be dishonoured.
- Difference in amount written in words and numbers: The number written in digits should match the one in words. Additionally, there should be no digits in the space for words and no alphabets in the space for digits. For example, the amount cannot be written as 50K or 50 thousand.
- Disfigured cheque: If the cheque is damaged or disfigured, it will not be processed. Overwriting or scribbling on the cheque is not acceptable as it may seem forged.
When a cheque is dishonoured, you will not only be charged with a penalty from your bank but, it will also have a negative effect on your credit score ever time it happens. Additionally, the party that you write the cheque to can file a criminal and civil charge against you.
Cheque bounce penalties
Banks charges differently based on the reason for the cheque to bounce. Note that these charges attract GST.
|Cheque/bill deposited with the bank returned unpaid by others (Local/ Outstation)||Charges|
|Cheque/bill up to Rs. 1 lakh||Rs. 150/- + GST|
|Cheque/bill above Rs. 1 lakh||Rs. 250/- + GST|
|Cheques drawn on SBI (for insufficient funds only)||Charges|
|For all customers||Rs. 500/- + GST, irrespective of the amount|
|Cheque returned charges for Cheques drawn on SBI (for technical reasons) for all customers. (Not to be charged where customer is not at fault as per RBI guidelines)||Rs. 150/- + GST|
|Local cheque deposited by customer||Rs.100 for every cheque return for financial reasons|
|Cheque issued by customer||Rs.350 for one cheque return per month; Thereafter, Rs.750 per return in the same month for financial reasons Rs.50 for non-financial reasons except for signature verification|
|Outstation cheque deposited by customer||Rs.150 plus other bank charges at actuals per cheque|
|Cheque return charges drawn on HDFC Bank - Local||Charges|
|Due to insufficient funds||Rs 350|
|Due to technical reasons||No charge|
|Non-maintenance of Average Quarterly Balance||Rs 400|
|Cheque return charges drawn on us deposited in other locations||Rs. 75|
|Cheque deposited returned unpaid||Rs 100 per instance would be levied|