Indian Legal News: RBI Says No Overwriting on Cheques

India legal news reports state that the latest directions from the Reserved Bank of India have been sent out as circular to other banks. The circular directs the banks, to dishonor cheques with overwriting. The rule will be applicable after 1^st December, 2010. The RBI has further directed the banks, to communicate this to their customers. The intention is to prevent frauds and expedite clearance of cheques. This rule will be particularly useful in those cases where the Cheque Truncation System (CTS) is used. Under this system, an image of a cheque is sent to clearing house for transfer of funds.

India Legal News: RBI Proposes New Rule to Prevent Frauds

India legal news brings you the latest updates about the new rule proposed by the RBI. The RBI has said that if there is change in the payee’s name or amount, a fresh cheque shall be issued. Also, a fresh cheque will be required, despite the presence of customer’s signature shown against the changes.

An RBI spokesperson said, “The notification regarding Cheque Truncation System which prohibits alteration will come into effect from December 1, 2010. There is no mention of July 1.”

In February 2010, the Central Bank of India, had issued a similar circular on ‘Standardization and enhancement of security features in cheque forms.’ The circular contained detailed norms for image-based processing of cheques.

The new rules will not be applicable to those cheques, which are cleared by using Magnetic Ink Character Recognition (MICR) or non-MICR system. They will not be compulsory for over the counter collection of funds or for direct collection of cheques, outside the Clearance House Arrangement.