Here's How Cheque Bounces Can Hamper Your Credibility

When your bank deducts a small amount because a cheque you issued to someone has been dishonoured, you may dismiss the matter with a shrug, or, may be not. Because there are no limits set by the Reserve bank of India (RBI) in this regard, banks charge different penalties on cheque bounce-related offences. (With their profit margins thinning, banks are using penalties on cheque bounces as a method to maintain the balance. This means you may have to pay much higher for a cheque bounce in future.) Recurring cheque bounces and subsequent penalties slapped by banks may certainly force you to pay attention.

The monetary penalty would look less harsh when you start applying for home loans and face rejection. Recurring cheque bounces will reflect poorly on your banking record, and based on that banks may be unwilling to lend you money. However, this is not all where it ends.

May we remind you here that in case a cheque bounces due to insufficient funds in your account, this would be considered a criminal offence. The person or the bank in whose favour the cheque has been issued can file a complaint under Section 138 of the Negotiable Instruments Act. As punishment, you may have to serve a jail term or pay a penalty of double the amount, or both. In case the default happened owing to a technical glitch, a complaint can be filed under Section 25 of the Payment and Settlement Systems Act, 2007. However, defaulters are seen prolonging the trails to avoid the punishment. But, we knew things just got more serious when Finance Minister Arun Jaitley made a special mention to cheque-related offences.

"As we move faster on the path of digital transactions and cheque payments, we need to ensure that the payees of dishonoured cheques are able to realise the payments. The government is, therefore, considering the option of amending the Negotiable Instruments Act suitably," Jaitley said in his Budget Speech of 2017-18.

Under the proposed changes, an offender will have to deposits 50 per cent of the fine or compensation awarded by the trial court as a precondition for appealing to a higher court. Recently, the Supreme Court has also held that an offender cannot get away with imprisonment to avoid paying compensation.

Then there are other implications of a bounced cheque bounced, too. Your bank may stop issuing you cheque books in case you are a repeat offender. Banks have the legal right to sell off the security you may have deposited against a loan and recover dues.

Also read: What If A Cheque Bounces?