New Cheque Payment Rule to be effective from January 1: Know what is RBI's Positive Pay System & Other Details

The Reserve Bank of India announced the introduction of new rule 'Positive Pay System' for Cheque Truncation System (CTS) in August 2020 to ensure safe and sound cheque payments. This new rule for cheque payment will become operational  from January 1, 2021. Under this new rule, cheque payments of Rs 50,000 and beyond will require re-confirmation of key details.

As per the RBI's notification "Positive Pay System for Cheque Truncation System", the National Payments Corporation of India (NPCI) has been given the responsibility to develop the Positive Pay in the CTS and make it available to the banks. In turn, the participant banks need to enable the system for account holders issuing cheques amounting Rs 50,000 and above. The Member banks can also implement the similar mechanism for the cheques collected outside the CTS.

Banks need to make the account holders aware about the features of Positive Pay System through SMS, website, internet banking and through display in their branches and ATMs. This mechanism will cover around 20% of total issued cheques by volume and 80% of total issued cheques by value in India. Have a look at the other important details of the Positive Pay System below:

What is Positive Pay System for cheque payment?

Positive Pay is a tool under the Cheque Truncation System (CTS) that detects any fraudulent activity involved in cheque payments. It does so by matching certain details of the cheque as provided by the issuer to the drawee bank with the presented cheque.

How cheque payment gets processed under the Positive Pay mechanism?

Under the Positive Pay mechanism ,the cheques get processed by the drawee bank on the basis of information shared by its customer while issuing the cheque.

Under this Positive Pay System, the cheque issuer submits a few details of cheque such as date, name of the beneficiary, cheque amount, etc. to the drawee bank electronically through SMS, Internet Banking, Mobile App, ATM, etc.

These details are cross checked with the presented cheque through the Cheque Truncation System (CTS). Any discrepancy in the details will be flagged by the CTS to drawee bank and presenting bank. The banks will then take the redressal measures.

Is it compulsory for customers to avail of 'Positive Pay System' for cheque payment?

To avail of the 'Positive Pay System' facility is solely at the discretion of the bank account holders. However, banks may consider to make this facility mandatory for cheque payment of Rs 5,00,000 and above.

When did the RBI announce Positive Pay System?

The RBI announced the Positive Pay System for Cheques on August 6, 2020 in its 'Statement on Developmental and Regulatory Policies' under the Payment and Settlement Systems. In order to ensure customer safety in cheque payments and reduce frauds, the RBI decided to introduce the Positive Pay mechanism for large value cheques.