Cheque Dishonour

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HO:BR:105 : 30 31.01.2013

Sub file: GEN-1

CIRCULAR TO ALL BRANCHES / OFFICES IN INDIA THROUGH INTRANET

Dear Sir / Madam,

Re : Policy on Dishonour of Cheques for Rs.1 crore and above, below Rs.1 croreand ECS mandates.

We request reference to our circular HO:BR:103:200 dated 24.09.2011 conveying the

Policy and procedural guidelines in respect of Dishonour of Cheques for Rs. 1 crore and

above, Below Rs.1 crore and ECS mandates.

The reviewed policy has been approved by the Board in its meeting dated

28.09.2012 vide agenda item O-4.

Branches are requested to go through the Policy documents as per Annexure andstrictly follow the guidelines in respect of dishonour of cheques. The reviewed

Policy shall be operative for one year from the date of approval and it will continue to bein force until reviewed further.

Branches should take proactive action immediately on dishonour of cheque in terms ofthe policy guidelines viz., contacting the customer, analyzing the reasons for return ofcheque, giving cautionary advice to customer, and encouraging customer for usingelectronic mode of payment. Branches are requested to study the statement of dishonorof cheques received from their Regional Office and give their proper remarks againsteach cheque.

As per the Policy, data in respect of Dishonour of Cheques for Rs.1 crore and above on

a quarterly basis is generated by us Annexure-1 (part A1 i.e cheques drawn by ourcustomer and returned unpaid and A2 i.e cheques deposited by our customer andreturned unpaid) through Data Ware House link and sent to respective Regional Offices.Regional Offices are required to incorporate action taken by the branches in each caseof dishnoured cheque for Rs.1 crore and above and submit the statement to us toenable us to submit the same to the Audit Committee of Board.

Yours faithfully,

Sd/-

( D. D. Singla )General ManagerHead Office, Baroda

Encl : As Above

OPERATIONS & SERVICES DEPARTMENTHEAD OFFICE, BARODA

Tele:0265-2361724 E-mail : [email protected]


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DIApproved by Bo

Operations & Servi

Head Office,

Baroda.

Date: 10.09.2012

POLICY

ON

HONOUR OF Card vide agenda item O-4

ces Department

For internal circulation

HEQUESdated 28.09.12


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iii) Dealing with incidence of frequent dishonor:

1. With a view to enforce financial discipline among the customers, banksshould introduce a condition for operation of accounts with cheques facility

that in the event of dishonor of cheque valuing Rs.1.00 crore and abovedrawn on a particular account of the drawer on 4 occasions during thefinancial year for want of sufficient funds in the account, no fresh chequebook would be issued. Also, the bank may consider closing of account atits discretion. However, in respect of advances accounts such as cashcredit account, overdraft account, the need for continuance or otherwise ofthese credit facilities and the cheque facility relating to these accountsshould be reviewed by appropriate authority higher than the Sanctioningauthority.

2. For the purpose of introduction of the condition mentioned at (1) above in

relation to operation of the existing accounts, banks branches should, atthe time of issuing new cheque book, issue a letter advising theconstituents of the new condition.

3. If a cheque is dishonored for a third time on a particular account of thedrawer during the financial year, bank should issue a cautionary advice tothe concerned constituent drawing his attention to aforesaid condition andconsequential stoppage of cheque facility in the event of cheque beingdishonored on 4thoccasion on the same account during the financial year.Similar cautionary advice may be issued if a bank intends to close theaccount.

iv) Evidence in respect of dishonored cheques and providing cooperation to

judicial and quasi judicial agencies

For the purpose of adducing evidence to prove the fact of dishonor of cheque on

behalf of a complainant ( i.e. payee / holder of a dishonored cheques ) in any

proceeding relating to dishonored cheque before a court, consumer forum or any

other competent authority, banks / branches should extend full co-operation,

and should furnish him / her documentary proof of fact of dishonor of cheques.

C: Goiporia Committee recommendation on Return of dishonour of Cheques

Banks are required to implement the recommendation of the Goiporia Committee that

dishonoured instruments are returned /dispatched to the customer promptly without

delay, in any case within 24 hours.

D: Policy and Procedural guidelines of Bank for dishonor of cheques

1. Return cheques must be properly entered in the Cheques ReturnRegister for dishonor of cheques.

2. The paying branch should return dishonored cheques presented

through clearing houses strictly as per the return discipline prescribedfor respective clearing house in terms of Uniform Regulations andRules for Bankers Clearing Houses.

3. The collecting branch on receipt of such dishonored cheques shoulddispatch it immediately to the payees / holders in any case within amaximum period of 24 hours. If there is holiday on the next day,than on the first day when bank branch reopens after holiday.


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3. However, in respect of advances accounts such as cash credit account, overdraftaccount, the need for continuance or otherwise of these credit facilities and thecheque facility relating to those accounts where cheques valuing Rs.1 croreand above drawn on a particular account of a drawer are returned on 4

occasions during the financial year for want of sufficient funds in the account isto be reviewed by appropriate authority higher than the sanctioning authority.Accordingly branches should incorporate such information in the credit / reviewproposal giving details of cheques returned, reasons, action taken etc. along withthis provision of policy and RBI guidelines for suitable action by sanctioningAuthority.

4. For the purposes of introduction of the condition mentioned here- in- before inrelation to operation of existing accounts, branches should at the time of issuingnew cheque book, issue a letter advising the constituents of the condition.

5. If cheques are dishonored for 3rd time on a particular account of the drawerduring the financial year, branches should issue a cautionary advice to theconcerned constituent drawing his attention to aforesaid condition andconsequential stoppage of cheque facility in the event of cheque beingdishonored on 4th occasion in the same account during the financial year. Thebranch may issue similar cautionary advice if the branch intends to close theaccount.

6. On receipt of Statement of dishonour of cheques of Rs.1 crore and above i.e.Annexure -1(PartA1 & A2) from Head office, Regional Offices should forward thesame to respective branches for incorporating their remarks / action taken. On

receipt of information from the branches, Regional Offices shouldscrutinize thesame, and ensure that wherever there is repetition of incident of dishonorof cheques, action taken by branches are incorporated andsubmit the samein consolidated form to Head Office for onward submission to ACB.

D.(ii) Procedural guidelines for Dishonour of Cheques for below Rs.1 crore( drawn by our customer)

1. RBI has not advised any definition of frequent dishonour of cheques of valueof less than Rs.1 crore. For the purpose of this policy, In any account , if there isan incidence of dishonor of cheques of less than Rs.1 crore on 6 occasions in a

financial year for want of sufficient funds, this will be considered as frequentdishonor of cheques.

2. Data in respect of cheques drawn in favor of stock exchanges anddishonored are to be consolidated separately irrespective of the value of suchcheques as a part of MIS relating to broker entities and be reported to theirrespective Regional office. The Regional Offices would report the data receivedto Head Office for apprising the Audit Committee of the Board as per formatgiven in the Annexure attached to the policy.

3. With a view to enforce financial discipline among the customers, branches should

stipulate a condition for operation of accounts with cheque book facility that inthe event of dishonor of a cheque valuing less than Rs.1.00 crore drawnon a particular account of the drawer on 6 occasions during the financialyear for want of sufficient funds in the account, , no fresh cheques bookwould be issued.Also the branch may consider closing of the account at itsdiscretion.


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4. However, in respect of advances accounts such as cash credit account, overdraftaccount, the need for continuance or otherwise of these credit facilities and thecheque facility relating to those accounts where cheques valuing below Rs.1crore and drawn on a particular account of a drawer are returned on 6 occasions

during the financial year for want of sufficient funds in the account is to bereviewed by appropriate authority higher than the sanctioning authority.Accordingly branches should incorporate such information in the credit / reviewproposal giving details of cheques returned, reasons, action taken etc. along withthis provision of policy and RBI guidelines for suitable action by sanctioningAuthority.

5. In case of dishonor of cheque on 5th occasion in a particular account of thedrawer during the financial year, branches should issue a cautionary advice tothe concerned constituent drawing his attention to aforesaid condition andconsequential stoppage of cheques facility in the event of cheques being

dishonored on 6th occasion on the same account during the financial year.Similar cautionary advice may be issued if a bank intends to close the account.

Any deviation in the compliance of the above procedures by the branches / fieldfunctionaries is to be viewed seriously and necessary deterrent action will be required tobe taken. Wherever , it is brought to light that there is delay in dispatching thedishonored cheques to the beneficiary, internal investigation to be carried out andsuitable action taken thereafter so that any scope for causing delay in or withholding thecommunication of the fact of dishonor of the cheques to the payee / holder of suchdishonored cheques.

E: Return of Dishonoured Cheques presented through CBOs (i.e. for the chequespresented on behalf of our customers drawn on other banks)

Bank has centralized clearing functions in many cities at City Back Offices (CBOs)

whereby processing of Inward and Outward clearing in respect of all branches of a

city are carried out at CBO. In such cases also, the guidelines mentioned above

remain unchanged. However, operational process of return of cheques from CBO

to paying / collecting branches as advised by way of various circulars and CBO

Operational Manual should be strictly complied with.

As on date, Bank has issued following circulars on issues relating to CBOOperations:-

HO:BR:99/57 dated 24.04.2007HO:BR:100/115 dated 08.08.2008HO:BR:101/134 dated 30.09.2009HO:BR:101/169 dated 12.12.2009HO:BR:102/03 dated 11.01.2010

CBOs and branches must comply with the procedure prescribed in respect of

return cheques stipulated in these circular which inter alia state

a) Instruments presented in outward clearing and returned unpaid should besent back to the branch through which the instrument was presented / lodgedin clearing on the same day so as to ensure that prompt and timelyinformation regarding dishonour of instrument is furnished to the payee bythat branch.

b) Collecting branch on receipt of such dishonoured cheques, should dispatch it/ deliver in person to the payees/holders immediately but in any case within amaximum period of 24 hours of return of instrument. If there is holiday onthe next day, than on the first day when bank branch reopens afterholiday.


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c) The branches should invariably acknowledge the cheque / cheques returnedby CBO for their record to avoid any future complaint of customers.

d) For better customer service, the branches should scan the inward clearing

screen pertaining to their branches in the morning for the cheques marked forreturn so that they may be able to inform their valued customers in time aboutpresentation of the cheques as a good gesture on their part.

F. Electronic Clearing Services Mandates (ECS):

Electronic Clearing Service (ECS) was introduced by Reserve Bank of

India (RBI) in early nineties as a new method of effecting bulk and repetitive

transactions electronically. .

ECS ( Debit):

In case of ECS (Debit) customer gives mandate for debiting his account for

payment of various bills such as Telephone, Electricity, Insurance Premium and

also for repetitive debit in his account. This mandate is to be registered in the

system after verification of the signature. Branches are to generate mandate

serial no. through the system which is to be mentioned on the physical mandate

letter for future reference. Branches should send a letter to user institution

/service provider enclosing a photocopy of the Mandate letter (Original to be

retained with the branch) requesting for User Debit Reference (UDR) number

and mentioning that the mandate will become effective only upon receipt of UDR

No. A copy of this letter should be endorsed to the account holder for information.

Procedure for return of ECS (Debit) :

ECS debits are returned when there is no sufficient balance in the account ,

closure of accounts, or there is discrepancy in account particulars.

In case where ECS debits are returned for want of funds 6 times in a particular

financial year, the branch should issue notice and the ECS mandate should be

treated as revoked under advice to the user institution/ service provider. Also the

branch may consider closing the account at its discretion by giving suitable notice

to the customer.

In the event of accounts already closed, branch should inform their customer by

sending Registered /A.D letter on the last recorded address about return of ECS

(debit) on account of closure of his/her account.

In the event of discrepancies in the particulars due to which ECS debits are

returned, branch should invariably contact the customer and inform him/her to

update the particulars of his account with the respective organization.

G. Periodicity of Review:

The policy for dishonour of cheques containing guidelines for dishonor of cheques forRs.1 crore and above,dishonour of cheques below Rs.1 crore and matters relating tofrequent dishonour of ECS mandates will be effective for one year from the date ofapproval and it will continue to be in force till the reviewed policy comes into place.

******


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Annexure-1

STATEMENT ON DISHONOURED CHEQUES FOR RS.1.00 CRORE AND ABOVE FOR THE

QUARTER ENDED ---------------- IN TERMS OF CIRCULAR NO. HO/BR/95/163. /DATED 22.08.2003..

Branch : Region : Zone : Telephone No.

(A 1 ) Dishonoured cheques for Rs.1.00 crore and Above - drawn by our customersmaintaining account with our Branches ( excluding cheques drawn in favour of StockExchanges)

SrNO./BR.

DateOfreturn

Chq.NO.

DateOfcheque

Amt A/cType&

NO.

NameOfDrawer

of chq

Nameofpayee

PresentingBank

ReasonOfreturn

Date onwhichThe chq

wasreturnedto thepayee

Date ofactualdelivery

ofchequetoBank/payee

Re-marks

1 2 3 4 5 6 7 8 9 10 11 12 13

( A 2 ) Dishonoured cheques for Rs.1.00 crore and above - Cheque deposited by ourcustomers in their account and returned unpaid by other Banks . ( excluding chequesdrawn in favour of Stock exchanges)

SrNo./BR.

DateOfreturn

Chq.No.

DateOfcheque

Amt A/cType&NO.

NameOfDrawerof chq

Nameofpayee

PresentingBank

ReasonOfreturn

DateonwhichThe chqwasreturned tothepayee

Date ofactualdeliveryofchequeto Bank/payee

remarks

1 2 3 4 5 6 7 8 9 10 11 12 13

Date : 1. Signatory2 .Name of the signatory.

Place : 3. Designation :


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Documents

Cheque Dishonour