Cheque Bounce: Causes and Consequences

A cheque bounce occurs when a cheque cannot be honored by the bank due to various reasons. Here are the main causes of cheque bounces and the subsequent actions taken:

Causes of Cheque Bounce

1. Insufficient Funds: The most common reason for a cheque bounce is insufficient funds in the account.

2. Signature Mismatch: If the signatures on the cheque do not match those on record, the cheque will bounce.

3. Expired Cheque: If the cheque is presented after its expiry date.

4. Account Closure: The account holder has closed the account from which the cheque is issued.

5. Technical Issues: Any other errors or technical issues with the cheque.

Actions Taken After Cheque Bounce

1. First Instance:

   • The bank informs the account holder and the cheque receiver about the bounce.

2. Second Instance:

   • If the cheque bounces again, the bank will inform both parties again. The cheque receiver can file a complaint with the Credit Information Bureau.

3. Third Instance:

   • If the cheque bounces for the third consecutive time, the account holder can be blacklisted. Legal proceedings, including filing a police report, may also be initiated.

Directives from the Central Bank

1. Blacklisting:

   • Individuals with bounced cheques may be blacklisted, preventing them from opening accounts, obtaining loans, or conducting banking transactions.

2. Mandatory Use of Cheque Writer:

   • Cheques must be filled out using a cheque writer on the front side.

3. Discrepancy Between Numbers and Words:

   • If there is a discrepancy between the amount written in numbers and words, the amount written in words will be considered valid.

4. No Cross Stamp:

   • No cross stamps or any stamps of other institutions should be on the front side of the cheque.

5. Digital Signatures:

   • Electronic cheques require digital signatures in black ink on the back side.

Cheque Bounce Process

1. First Cheque Bounce:

   • The bank issues a cheque bounce memo upon request.

2. Second Cheque Bounce:

   • If the money is not received within a week of the first bounce, a second cheque bounce request can be made to the bank.

3. Third Cheque Bounce:

   • After the third consecutive bounce, a request can be made to blacklist the account holder.

Taking timely and appropriate steps in case of a cheque bounce is crucial to avoid legal issues and financial losses.