In a bid to end cheque frauds, the Reserve Bank of India (RBI) has asked the banks to introduce a system called Positive Pay. The system is expected to act as a firewall to stop huge loss on account of banking deceit. This new rule for cheque payments system will come into effect from 1 January 2021. On August 6, RBI decided to introduce the Positive Pay for Cheque Truncation System (CTS). Under the postive pay system for cheque, re-confirmation of key details may be needed for payments beyond Rs 50,000. While availing of this facility is at the discretion of the account holder, banks may consider making it mandatory in case of cheques for amounts of Rs 5 lakh and above.
What is the concept of Positive Pay system?
In concept, the system is simple. The concept of Positive Pay involves a process of reconfirming key details of large value cheques. Under this process, after an account holder issues a cheque to anyone, he will share the cheque details (like date, name of the beneficiary / payee, amount, etc.) through SMS, mobile app, internet banking, ATM, etc. with the bank.
Before making payment against the cheque, banks will match the details available on the cheque with those that the issuer has provided. Such checks will ensure banks process genuine cheques only. Any discrepancy is flagged by CTS to the drawee bank and presenting bank, who would take redressal measures.
“National Payments Corporation of India (NPCI) shall develop the facility of Positive Pay in CTS and make it available to participant banks,” states RBI notification.
RBI has also advised the banks to create adequate awareness among their customers on features of Positive Pay System through SMS alerts, display in branches, ATMs as well as through their web-site and internet banking.
Should you opt for the new cheque payment system?
The key advantage of the system is fraud prevention. Even if your bank doesn’t make Positive Pay system mandatory, do opt for it to avoid falling prey to banking frauds.