On January 1, 2021, the Reserve Bank of India (RBI) will introduce the ‘Positive Pay System’ for cheque transactions above Rs 50,000 in a bid to enhance safety and eliminate frauds.
What is the Positive Pay System for cheque transactions?
The concept of Positive Pay involves a process of reconfirming key details of large-value cheques. Under this process, the issuer of the cheque submits electronically, through channels like SMS, mobile app, Internet banking and ATM, certain minimum details of that cheque (like date, name of the beneficiary, or payee and amount) to the drawee bank, details of which are cross-checked with the presented cheque by Cheque Truncation System (CTS).
Any discrepancy is flagged by CTS to the drawee bank and presenting bank, who then take redressal measures.
What type of cheques will come under Positive Pay?
Banks will enable the new system for all account holders issuing cheques for amounts of Rs 50,000 and above. While availing of this facility is at the discretion of the account holder, banks may consider making it mandatory in case of cheques for amounts of Rs 5,00,000 and above. The National Payments Corporation of India (NPCI) will develop the facility of Positive Pay in CTS, and make it available to participant banks.
What will be the new dispute redressal mechanism?
Only those cheques that are compliant with the new system will be accepted under the dispute resolution mechanism at the CTS grids. Member banks may implement similar arrangements for cheques cleared or collected outside CTS as well.
The RBI has already told banks to create adequate awareness among their customers on features of the Positive Pay System through SMS alerts, displays in branches, ATMs, as well as through their websites and Internet banking. The Positive Pay System will be implemented from January 1, 2021.
What will be the share of Positive Pay in overall cheque transactions?
The new measure will cover approximately 20 per cent and 80 per cent of total cheques issued in the country by volume and value, respectively. The Cheque Truncation System (CTS) for clearing cheques is operational pan-India, and presently covers 2 per cent and 15 per cent of total retail payments in terms of volume and value respectively.
The average value of a cheque cleared in CTS presently is Rs 82,000. The CTS-2010 standard specifying minimum security features on cheque leaves acts as a deterrent against cheque frauds, while standardisation of field placements on cheque forms enables straight-through-processing by use of optical or image character recognition technology.
Why is the new system being implemented?
The RBI says the Positive Pay system is to augment customer safety in cheque payments and reduce instances of fraud occurring on account of tampering of cheque leaves. Banks had recently witnessed a rise in frauds involving high-value cheques. The RBI announced the introduction of Positive Pay System for CTS on August 6.
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