Banking activity is crucial for the development that includes different services. You may face consequences if you don’t have correct information or take precautions regarding the same. So, you need to check the full information to understand some essential information that can help you avoid legal consequences or financial penalties. Everyone should be aware of Cheque Bounce Rules that have a significant impact on financial activity and can impact your finances.
Many people like to perform their business using cheques either to make payments to other business entities or to provide some financial support for certain purposes. In each case, you need to take care that your cheque does not bounce to avoid the Cheque Bounce Charges. It can be imposed if your cheque fails to complete the process. Understanding these rules may help you to avoid such case of cheque bounce and perform your business without dealy.
Cheque Bounce Rules
You may have used a cheque to pay for things or make higher payments to anyone or may have listened to the cheque and its uses. So, you need to understand that using a cheque can also cause financial harm if fail to follow certain rules. So, you need to check the Cheque Bounce Regulation to perform your business properly without any penalty.
You can collect information on some basic rules that every individual needs to follow while making cheque payments. This article will explore the Cheque Bounce Rules to understand the smooth process and take precautions to avoid any financial charges. This article also explains the different rules, circumstances when a cheque bounces, and relevant information.
Understanding Cheque Bounce Rules
You need to know that Cheque Bounce is a criminal offense that can cause legal action or consequences. When any bank dishonoured a cheque due to any valid reason then your cheque is termed as a bounced cheque. It can be caused due to various reasons like wrong input, misspelling of the payee’s name, or others. It can have legal consequences that should be avoided by updating yourself with Cheque Bounce Rules.
According to Section 138 Negotiable Instrument Act when cheques bounce due to insufficient funds in the bank account, you may get a notice from the relevant authority. However, other reasons than insufficient funds may cause Cheque Bounce Charges as a penalty imposed by the bank on the issuer. So, understanding the common mistakes that can make your cheque bounce should be avoided.
List of incorrect information Result in Cheque Bounce
You need to know that incorrect information is one of the major causes of the cheque bounce. Therefore, you should have an understanding of some common mistakes that can cause problems. Some Incorrect Information Causes the Cheque to Bounce and may lead to making it void. So, you need to keep in mind that you should not provide incorrect information while issuing a cheque.
Checklist of incorrect information to avoid Cheque Bounce
- Wrong Date: You need to be careful when mentioning the date on the cheque. Be careful when mentioning the date on the cheque because it has been presented to the bank within a certain time period. Presenting late may cause a Cheque Bounce.
- Mismatch amount in figure and words: A Cheque with a mismatch amount written in figure and words and also made incorrect may result in Cheque Bounce Charges.
- Fewer Funds in Bank Account: If you fail to maintain your bank account balance for a minimum of the cheque-mentioned amount, your cheque will bounce. It may result in legal notice and other legal consequences.
- Misspelling in Payee’s name: While filling in information must ensure you don’t misspell the Payee’s name. It can cause Cheque Bounce Charges applied by the bank on the issuer that can lower your bank balance.
- Signing incorrectly: The Issuer’s incorrect sign may also result in a Cheque Bounce which may result in financial loss.
- Making alteration or overwriting: You should also ensure that the cheque does not contain any alteration or overwriting. It may become a reason for Cheque Bounce and you may have to face financial penalty.
Cheque Bounce Consequences
Issuers may have to face different consequences in case of cheque failure. Therefore, you need to ensure that you understand the rules before issuing a cheque. The Cheque Bounce may cause legal consequences that may depend on the Cheque Bounce Reasons.
- Bank Penalty or Charges: Any valid reason for the Cheque bounce may allow the bank to impose some penalty. This can cause financial loss that may lower your bank account balance and result in financial burden. Drawer may be liable for a fine that can go up to twice the cheque amount.
- Legal Notice: Section 138 of the Negotiable Instruments Act allows giving notice to the issuer which can lead to a penalty. Drawer may be imprisoned for up to two years as the Cheque Bounce Legal Consequences.
- Civil suits: Your cheque bounce may lead to the offending payee who has the right to file a civil suit. It can be done to recover their payment and may also go for interest as, a penalty for damages that had to face.
- Negative impact on CIBIL Score: it is essential to understand that Cheque Bounce results can also affect your CIBIL score. It may lower your score affect your financial borrowing potential and result in facing challenges when looking for borrowing.
- Impact on reputation: When a bank returns your check due to any valid reason, it can hurt your reputation. In the case of a business cheque, you will have to deal with a negative reputation in the business that can have a high impact on your business.
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Samarth Choudhary is a Chief Editor at keralacobank.com. He has overall editorial experience of 10 years in online media. He has completed his graduation from University of California and masters in Finance from University of Dallas in year 2010. His major interest and expertise is in Finance, Taxes, Government Aid and Schemes. His Major focus is to help users to get relevant information which are published on keralacobank.com in easy and precise form.
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