Overwriting on cheques: Bank’s duty to tell you
On June 22 last year, the Reserve Bank informed banks that from December 1, 2010, all cheques cleared under the image-based cheque truncation system (CTS) should be free of any alteration, correction or overwriting and that any cheque that did not meet that standard would automatically be invalidated.delhi Updated: Jan 15, 2011 23:06 IST
On June 22 last year, the Reserve Bank informed banks that from December 1, 2010, all cheques cleared under the image-based cheque truncation system (CTS) should be free of any alteration, correction or overwriting and that any cheque that did not meet that standard would automatically be invalidated.
Under CTS, it is the virtual cheque or the image of the cheque captured by the presenting bank that moves through various steps in the cheque clearing cycle and the RBI was of the view that prohibiting cheques with alterations or overwriting would be an important step towards curtailing fraud.
Given the consequences of a dishonoured cheque, banks should have immediately sent mailers to all their customers informing them of the RBI directive. Such a step would have saved many a bank customer considerable hardship, inconvenience and even financial loss caused as a result of rejection of such cheques. Yet, banks failed to do this. Should they not be held liable for the consequences of their inaction?
Here is a typical case:
Kalyanjit Chattopadhyay: Towards payment of my credit card bill, due on December 26, I issued a cheque well in advance. However it was only on January 7 that I got a letter from the credit card issuing bank saying that my cheque had been dishonoured due to overwriting at one place, though duly signed by me to authenticate the correction. On my query, the bank told me that the rejection was in accordance with an RBI ruling on the subject, which I was not aware of.
Now my question is: Why was I not informed of the cheque dishonour before the due date? What is the use of writing the mobile number on the back of the cheque? Is there any responsibility on the part of the bank where I have my salary account, to inform me about the problem of overwriting?
Answer: As you rightly point out, since your mobile number was on the back of the cheque, the credit card issuing bank should have immediately informed you of the dishonour — in addition to sending you a snail mail; they should have called you up and informed you of it.
But I would hold the bank in which you have your account, primarily liable for two reasons: First and foremost, it was the duty of the bank to inform its customers of the new RBI directive, so that they do not issue such cheques. It failed in this primary task.
In the RBI circular of June 22, 2010, titled “Standardisation and Enhancement of Security Features in cheque forms”, it clearly says that “Banks are advised to ensure that adequate care is taken to educate the customers and to create awareness among them so that the entire process is carried out in a smooth manner.”
Second, when they saw your cheque with overwriting, they should have immediately informed you about the RBI circular and asked you to issue a fresh cheque and not routinely sent it for clearance. They failed to do that too.
Given these facts, your credit card company should not impose any late payment fee. If there is no positive response, complain to the RBI and also the Banking Ombudsman.