New rule for check payments starting January 1: everything you need to know

New Delhi: The Reserve Bank of India (RBI), earlier this year, decided to introduce the “positive payment system” for check payments. Under the new rule, key details will need to be reconfirmed for payments over Rs 50,000. This new rule for payment by check will take effect from January 1, 2021.

Note that the announcement was made by RBI Governor Shaktikanta Das in August MPC. The new ‘Positive Pay’ rule has been introduced to keep consumer safety in the spotlight and reduce instances of fraud and abuse regarding payment by check.

What is a positive payment system?

In its statement, RBI explained: “The CTS-2010 standard that specifies minimum security features on check sheets acts as a deterrent against check fraud, while the standardization of field locations on check forms allows direct processing by using optical character / image recognition technology. “

“In order to further increase the customer’s security in check payments and to reduce the cases of fraud that occur due to the manipulation of check sheets, it has been decided to introduce a Positive Payment mechanism for all checks valued at Rs 50,000. or more, “he added.

Here are the key things to know about the new rule:

• Under the Positive Pay mechanism, after an account holder writes a check to anyone, they will share the details of the check with the bank. An account holder shares the details of the issued check, such as check number, check date, payee name, account number, amount, etc., with the bank along with an image of the face and the back of the check, before giving it to the payee. .
• Before making the payment against the check, banks must match the data available in the check with those that the issuer has provided, that is, when the beneficiary sends the check for collection, the data of the check is compared with the data provided to the bank via Positive Pay and if the details match, the check is accepted.
• The Positive Pay concept involves a process of reconfirming key details of high value checks. CTS communicates any discrepancies in the details to the drawee bank and the presenting bank, who would take corrective action. The National Payments Corporation of India (NPCI) will develop the Positive Pay function in CTS and make it available to participating banks.
• Banks will enable it for all account holders who write checks for amounts of Rs 50,000 or more. While the use of this service is at the discretion of the account holder, banks may consider making it mandatory in the case of checks for amounts of Rs 5,00,000 or more.
• Checks that comply with the instructions will be accepted under the dispute resolution mechanism on the CTS networks. Member banks can also implement similar arrangements for checks cleared / cashed outside of CTS. Banks have been advised to create adequate awareness among their customers about the features of the Positive Payment System through SMS alerts, display at branches, ATMs, as well as through their website and internet banking.

It is worth adding that the Check Truncation System (CTS) for check clearing is operational throughout India and currently covers 2 percent and 15 percent of total retail payments in terms of volume and value respectively. . According to available data, the average value of a cleared check in CTS is currently Rs 82,000.