Explained: How RBI's positive pay system safeguards cheque transactions

The RBI’s positive pay system (PPS) for cheque transactions was implemented from January 1. All banks now provide this mechanism. While it will make payments via cheques safer, it will also make the process a tad cumbersome, especially for people who issue high-value cheques frequently but are not tech savvy.

How will it work?

Customers will have the option to reconfirm key details of cheques above Rs 50,000, using channels like text messages, the bank’s mobile application, internet banking, automated teller machines, and so on. 

Puneet Kapoor, president (products), alternate channels and customer experience delivery, Kotak Mahindra Bank, says: “The issuer of the cheque will be required to submit certain cheque details like date, instrument number, amount, etc of the drawee (issuing) bank.”

Once the cheque is submitted for realisation via cheque truncation system (CTS) clearing, details will be validated against those provided to the bank via PPS. Any discrepancy will be flagged to the drawee bank and the presenting bank for redress.

Kapoor says: “If there is a discrepancy in the details provided, the cheque will be returned with a non-financial technical return reason like ‘Refer to drawer’.” Customers will need to exercise caution while using this mechanism. 

Anjan Dasgupta, partner, DSK Legal, says: “Ensure the details provided for verification tally with the details of the cheque issued by you, otherwise the cheque will be rejected on account of data discrepancy.” If this happens, the issuer will have to initiate a fresh PPS request via email, giving the correct details of the cheque.

Enhanced safety

Cheque-leaf frauds are a major concern for banks and customers. Sameer Jain, founder and managing partner, PSL Advocates & Solicitors, says, "With increased access to technology, fraudsters can create multiple fake cheque leaves and indulge in various types of cheque frauds.” 

Ratan Kesh, EVP and head (retail operations and services), Axis Bank, says: “It will provide additional measures to tackle risks of tampered/counterfeit cheques used.”

Who can use it

All account holders issuing cheques of over Rs 50,000 can use this mechanism. Some banks have made it mandatory to use if for cheques of Rs 5 lakh and above, while others have not. Naveen Kukreja, CEO and co-founder, PaisaBazaar, says: “The RBI has allowed banks to make PPS mandatory for cheque amounts of Rs 5 lakh and above.” Federal Bank, StanChart, Central Bank of India, etc have made it mandatory for cheques of Rs 5 lakh and more. Others ask customers not participating in PPS to just fill out a declaration.

Added compliance burden

In the case of some banks, customers need to share details of the issued cheque at least 24 working hours before it is presented for clearing. 

Jain says, "If the details are not submitted on time, it may lead to non-encashment and then redress procedures." 

For bank account holders who do not know how to use email or other channels, submitting cheque details for PPS might be onerous.

If your bank mandates you follow the PPS norms for cheques of more than Rs 5 lakh, do so. But for cheques of lower value, you could use other payment channels provided by your bank.