| When cheques bounce ... |
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Two things will follow if you issue a cheque to your friend and it bounces. You will have to pay a penalty. Your friend, too, will be penalised by the bank where s/ he deposits the cheque. And, if your cheque towards repayment of a loan bounces, then, in addition to the penalty for the bounced cheque, ( charged by both banks), you will also pay late payment charges. Technically speaking, the solution is simple: Dont let your cheque bounce! However, ensuring sufficient funds in your account always is easier said than done. It is possible the loan re- payment starts the day after salary gets credited into the savings bank ( S/ B) account. Sometimes, your salary gets delayed by a couple of days and you don't notice there aren't enough funds in your account. Result: your loan repayment cheque bounces and you pay the penalty. It becomes more serious if you run multiple loans simultaneously. Let us assume your S/ B account is with State Bank of India and you issue a cheque of ₹ 50,000, which bounces due to insufficient funds. You will have to pay a penalty of ₹ 102. If the amount is ₹ 1 lakh, the penalty would be ₹ 204. If the cheque bounces due to technical reasons such as inconsistency in signature or over- writing on the cheque, then the charges are ₹ 76. If your friend deposits the cheque ( issued by you and bounced) with SBI, he will be charged the same penalty. If your S/ B account is with ICICI Bank, the penalty is ₹ 350 for the first month and ₹ 750 thereafter, if it is due to insufficient funds (₹ 50 for technical reasons). If your friend deposits the bounced cheque in a local branch of ICICI Bank, the penalty is ₹ 100. If deposited in an outstation branch of ICICI, the penalty is ₹ 150. Banks will also charge for expenses such as returning the cheque by post, service charges, etc. If the cheque towards your home loan repayment bounces, you will also have two per cent as late payment charges in case of both ICICI and SBI. Neither the Reserve Bank of India nor the Indian Banks' Association ( IBA) has prescribed amaximum or minimum limit for the penalty for chequebouncing and it is for individual banks to decide, says V N Kulkarni, chief counsellor at Abhay, aBank of India- sponsored debt counselling centre. With the cost of operations increasing and interest income from loans diminishing, banks look to raise their fees to meet expenses. " When customers issue cheques, it is their responsibility to ensure balance is available in the account. If the cheque bounces, the bank will not bother whether it is because the account holder has got the salary or not. Therefore, it is in the customers interests to avoid unnecessary charges," says Kulkarni. Harsh Roongta, chief executive officer of Apnapaisa. com, says service charges by banks should not be looked at in isolation. Because when you do, it is obvious a ₹ 750 penalty sounds high. " It may seem so, especially if through oversight a cheque I issued gets bounced as funds probably hit my account a minute after the cheque was returned for insufficient funds," he says. There is a reason why banks charge seemingly hefty penalty for cheque bouncing. In the earlier systems, banks enjoyed alot of hidden income. For instance, the interest on S/ B accounts were earlier payable on the minimum balance between the 10th and the last day of the month, but now it is paid on a daily basis. With no room for such hidden income now, banks have turned to other avenues to make up for the income loss. "While ideally competition should solve such issues, it has not always worked in India. Since neither competition nor the self regulatory organisation seem to be able to contain charges, maybe it is time for the regulator to lay out maximum service charges in some areas," says Roongta. CHEQUE BOUNCE PENALTY CHARGES* BY LEADING BANKS IN INDIA Bank Cheque issued by customer Local cheque deposited Outstation cheque deposited SBI For Insufficient fund-<₹ 1 lakh:₹ 102, For insufficient fund-<₹ 1 lakh:₹ 102 For insufficient fund>₹ 1 lakh:₹ 204+ >₹ 1lakh:₹ 204+ <₹ 1lakh: ₹ 102,>₹ 1lakh:₹ 204 For technical reason:₹ 76+ For technical reason:₹ 76 + For technical reason:₹ 76 + PNB <₹ 1 lakh: ₹ 75 to ₹ 100; For Cheques upto ₹ 1 lakh: ₹ 100 For cheques upto ₹ 1 lakh: >₹ 1 lakh up to ₹ 1 cr: ₹ 200 per instrument. Above ₹ 1 lakh: ₹ 100 per instrument. Above ₹ 200 per instrument. ₹ 1 lakh: ₹ 200 per instrument ICICI Bank ₹ 350/ cheque/ month; Thereafter, ₹ 100/ return for financial reason ₹ 150 plus ₹ 750/ return in the same month for financial reasons. ₹ 50 for non- financial reasons HDFC Bank ₹ 350/ cheque/ quarter; Thereafter, ₹ 100/ return for financial reason NA ₹ 750/ return in the same quarter for financial reasons. ₹ 50 for non- financial reasons Axis Bank ₹ 350 per return ₹ 100 per return ₹ 100 per return *Charges on regular savings bank accounts; Note: The above mentioned charges are as per published data on the respective bank websites as on January 22. +In addition to the penalty banks also charge you service tax and expenses incurred on posting the cheque Banks charge double penalty - where the cheque is issued & where it is deposited CRIMINAL OFFENCE: If a cheque bounces due to insufficient funds, it is a criminal offence. The person in whose favour the cheque was issued can file a complaint under Section 138 of the Negotiable Instruments Act. If the cheque is issued in favour of a bank, then the bank can file case. The punishment can be imprisonment and the penalty awarded can be up to 100 per cent of the amount. Even if the default is in case of Electronic Clearing Service, a complaint can be filed under Section 25 of the Payment and Settlement Systems Act, 2007. |
Got pre- 2005 notes? Don't panic
The Reserve Bank of India ( RBI) recently said it would completely withdraw from circulation all currency notes issued before 2005.
The central bank has asked the public to exchange pre- 2005 notes at bank branches starting from April 1, 2014. RBI said it wants to withdraw old currency notes and replace them with newer ones, which have enhanced security features.
These features make it easier to differentiate between real and fake currency.
Till July 1, 2014 you can exchange old notes without any conditions. Thereafter, if you want to exchange old notes in large numbers, you will have to furnish your proof of identity and residence. However, before you panic and rush to the bank, let us see what exactly the central bank's advisory means.
1WHICH NOTES WILL BE WITHDRAWN? Notes issued before 2005 will be withdrawn. It is estimated that a lot of fake currency notes entered the system before 2005. Since then, RBI started introducing features which make it tougher to counterfeit currency notes.
2HOW CAN THESE NOTES BE IDENTIFIED? Check the reverse side of the note. Those issued before 2005 do not have the year of printing on them.
3WILL ALL BANK BRANCHES EXCHANGE THESE NOTES? From April 1, 2014 till June 30, 2014, you can exchange these notes in any bank branch and you can exchange any number of notes.
4WHAT WILL CHANGE AFTER JULY 1? From July 1, to exchange more than 10 pieces of ₹ 500 and ₹ 1,000 notes, non- customers will have to furnish proof of identity and residence to the bank branch where they exchange the note.
This mean, if you go to a branch of a bank where you dont have an account, you will have to show documents such as drivers licence, Aadhaar card, passport, PAN card etc. However, if you want to exchange notes of lesser than ₹ 500 denomination or lesser than 10 pieces of notes of ₹ 500 or ₹ 1,000, there is no need to show any proof.
On the other hand, if you are a customer of a particular bank and you go to the branch of that bank, then you can exchange any number of notes, without giving any proof of identity.
5WILL BANKS CHARGE ANY EXTRA FEE FOR EXCHANGING NOTES? No. Banks wont charge any fee.
6WILL I GET THE FULL VALUE OF MY NOTES WHEN I EXCHANGE? Yes. Banks will give you the full value of the notes you exchange.
7WHAT SHOULD I DO IF I GET AN OLD NOTE FROM THE ATM? Chances of this happening are less because RBI has been regularly replacing older notes with newer ones. So, a lot of notes issued prior to 2005 have already been replaced. However, if you do get pre- 2005 notes from the ATM, you must exchange the notes at a bank.
Exchange old ones at your bank branch
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