A small change that will be visible in the coming days will impact the way Indians handle bank cheques. The Reserve Bank of India (RBI) has changed the rules for permissible alterations on cheques. Several banks have already begun informing their customers about bringing this change into effect soon.
Cheques are instruments used for making and receiving payments and used by individuals and corporate entities. Their use is widespread and constitutes an important part of bank dealings for people.
If there is a mistake made while writing the details on the cheque, an individual currently makes the necessary change on it. To confirm the change has been made by the right person and is not a fraud, the account holder/s then sign where the change has been made. This has been accepted over the years.
CHANGE
But, this will change. To standardise and enhance security features in a cheque form, the RBI came out with a benchmark prescription called 'CTS-2010 Standard' this February. Among the various points mentioned, RBI has clearly mentioned prohibiting changes and alterations on cheques.
The important thing is that any alteration on cheques, except for validation of dates (that, too, if required) cannot be made. This would mean the old process of signing after making the change would no longer work; a new cheque would have to be made. This is expected to help banks in controlling fraud, as no change would be permitted in areas like the name of the payee, amount of cheque in words and figures and so on. For example, if you are writing a cheque in the name of Amit but you write Amti, then you need a new cheque. The name on the cheque cannot be crossed out and the right one written. Similarly, Rs 5,000 written as Rs 50,000 would require a new cheque, with the figures tallying. This is a big change set in motion and banks have been given time for its implementation. They are in the process of intimating their customers about it.
IMPACT
The first impact of the change is that individuals will have to change the manner in which they operate and deal with cheques. Even a small mistake will make the cheque unusable. All details have to be mentioned correctly.
The other angle that will arise is cost. Making a mistake is fine, but where the bank is charging for the cheques, this will entail an additional cost. True, the cost will not be high but if there are lots of mistakes, the total cost would rise. If a bank is charging Rs 100-200 for a 50-cheque booklet, several cheques wasted means expense incurred.
There is a second cost angle. If there is a mistake and the cheque is put into the system with the change and then this is rejected by a bank, another problem will arise. There are heavy penalties for a returned cheque and this could run into anything from Rs 250-750. Even if you are not the person who issued the cheque, a return can lead to a penalty for you, too. A silly mistake can lead to a financial impact, as well as the loss of face or credibility that would arise when such a cheque goes back unpaid.
The manner of operation for the individual will also change, in the sense that they will always have to be ready in case something goes wrong. Say, for example, you go to pay a bill for Rs 540 and then you realise it is for Rs 560. Today, if you are the account holder, you make the change on the cheque with you and sign; the process is smooth and easy to achieve. However, in the future, even if you are the account holder, this will not work and what you will be required to do is to carry additional cheques.