What is Check Bounce Penalty Charge ?
Check Bounce - Check bounce can happen for a number of reasons, but it is an offense under the Act if a check bounces due to insufficient funds in the drawer's account. The bank should dishonor the reimbursement check and issue a return memo citing the refusal as insufficient income. In this instance, the payee can send a check bounce notice to the drawer, requesting payment of the check amount.
Bouncing of a check is a violation of Section 138 of the Negotiable Instruments Act, 1881, which provides for a fine of up to two years, or both, of double the value of the Check . Whenever the customer shows the check to the bank for claims, the bank dishonors it without any charges with a message indicating financial difficulties. Thus it is known as bounced Check.
What is a check ?
A check is a bill of exchange in which one party instructs a bank to transfer money to the other party's bank account. It is a negotiable instrument protected by the Negotiable Instruments Act of 1881.
When the bank is not able to process the check due to various reasons, it is called "Check bounced". Before looking at the penalties levied by most Indian banks, let's take a look at the most common reasons for check bounce and why you should not write checks lightly.
What is the reason for check bounce ?
- Insufficient balance in the account
- Text and numbers mismatch
- Opposite sign
- Dishonored check
- Overlapping
- Check Expiration
If the current draw balance cannot fund the payment of the Check , the bank should dishonor the Check . The bank should forward it to the payee with a memo stating that the Check 's credit limit is insufficient to cover payment of the Check .
Other reasons could be problems with the check date, account number or amount, bounced checks, or problems with the account being locked. Some other issues may prevent payment. Company badge is not available in case of Check , doubtful Check , death or insanity of Check , writing on check address etc.
After three months of writing, the check has to be deposited again in the drawer for payment and if the checker does not deposit the check in the bank within three months, it will become void. When a post-dated check is received by the bank, it is returned to the sender.
Other reasons could be problems with the check date, account number or amount, bounced checks, or problems with the account being locked. Some other issues may prevent payment. Company badge is not available in case of Check , doubtful Check , death or insanity of Check , writing on check address etc.
After three months of writing, the check has to be deposited again in the drawer for payment and if the checker does not deposit the check in the bank within three months, it will become void. When a post-dated check is received by the bank, it is returned to the sender.
What happens when the check bounces ?
Depending on the reason for the bounce, the issuer will be liable for a penalty on dishonored Check . The Negotiable Instruments Act of 1881 makes it a criminal offense to dishonor a check for insufficient funds. The payee has to pay a fee for issuing a check for an account with insufficient funds. The Check has three months to sue the payee or allow the payee to reissue the Check .
Issuing a dishonored check to the payee is punishable with imprisonment of up to two years. If a check is returned to you unpaid, banks will also levy a penalty on it. The penalty varies depending on the bank. Banks may have different penalty limits for the amount of dishonored checks issued.
What are the legal effects of a dishonored check in India ?
If the receiver decides to sue, the drawer has an immediate opportunity to pay the cash. The payee has to do this thirty days after receiving the check return memo from the bank. The payee has to send a notice to the Check from the date of payment and the notice should mention that he has to pay the amount to the payee within 15 days of the receipt of the notice.
If the drawer fails to pay the amount to the payee within 30 days of the receipt of the notice, he has every right to file a criminal complaint against the check issued under the Negotiable Instruments Act of 1881. However, the receiver has to complete the charge or inquiry within one month from the date of termination notice.
Check Bounce New Rule 2023
According to an article published by the Reserve Bank of India (RBI) in early August 2021, consumers whose financial operations heavily depend on checks or who intend to use checks will be required to maintain a minimum bank balance . If this minimum balance is not maintained then the check will bounce. In addition, monetary penalty may also be imposed on the customer presenting the Check. In addition to these reforms, RBI announced that the National Automated Clearing House (NACH) will be open 24 hours a day, seven days a week.
