IN response to the article, Cheque: An instrument of credibility, which appeared in this column a few weeks back, some of the readers have raised several questions about this instrument of credibility. One of the readers has asked what if a cheque gets lost in transit. Basically, he has quoted several incidents where the bank was responsible for the loss of instrument/cheque during transit in clearing process and the customer was tossed from pillar to post without his fault. Another reader has expressed his displeasure over inordinate delays in cheque clearing, which subjects them to financial loss for none of their fault. While as there are some readers who have raised doubts over the outstation cheque collection charges.

 Of course, there are the numerous incidents where cheques have been lost in transit and the customer comes to know about it when he learns that the the money has not been credited to his account. In this situation, the bank officials have been known to wash their hands off the matter by asking the customer to get a new cheque.

 According to a circular issued by the Indian Banks' Association on orders from the Reserve Bank of India, "In respect of cheques lost in transit or at the paying bank's branch, banks should immediately bring it to the notice of the account holder so that he can issue a stop payment instruction. He can also take care that other cheques issued by him are not dishonoured due to the non-crediting of the amount of the lost cheque.”

  Since the onus for such a loss is on the collecting banker, not on the account holder, customers are not only expected to be reimbursed for any ensuing expenses, but are also entitled to the interest for the time taken to obtain the duplicate cheque.

 As far as delays in cheque clearing is concerned, let it be noted that banks are required to afford credit or debit for local cheques on the day when it is presented in the bank. At the most, due to unavoidable circumstances, it has to be credited or debited on the next day of presentation in clearing. For Outstation Cheques, the maximum time-frame for collection of cheques drawn on state capitals, major cities and other locations are 7, 10 and 14 days, respectively.

 As per the rules in place, if there is any delay in collection beyond this period, the customers are entitled to interest at the rate specified in the cheque collection policy of the bank. In case the rate is not specified in the cheque collection policy, the customers are entitled to receive interest at the rate applicable for fixed deposits for the corresponding maturity. It is notable that it is mandatory for the banks to have cheque collection policy in place in which among other things it also indicates the limit up to which outstation cheques are given immediate credit. This means that an outstation cheque should not take more than 15 days to be processed, while a local cheque should be cleared within 48 hours. So, if you monitor your account during this period, you will notice things are amiss early on and can issue a stop payment instruction immediately. So as a customer, you should exercise your rights when you are issued a cheque book by your bank.

 It is notable that banks are required to develop their individual policy/procedures relating to collection of cheques. It is also worth mentioning that banks have been advised by the Reserve Bank of India in November 2004 that they may formulate a comprehensive and transparent Cheque Collection Policy taking into account their technological capabilities, systems and processes adopted for clearing arrangements for collection through correspondents. Following the RBI directions the Indian Bank Association issued suitable instructions to the banks to incorporate certain points in the cheque collection policy formulated by them, which mainly include the liabilities of the bank responsible for loss of cheque in transit during clearing process.

 Notably, J&K Bank has already put a policy in place which entitles customers for certain rights in case there is inordinate delay in collection of outstation cheques or cheques/instruments lost in transit during clearing process. In the former case, the bank, as per its compensation policy, will pay interest to the customers without any demand from  them in all types of accounts if the delay in collection of outstation cheques is due to the negligence of the branch. In case of cheques or instruments lost in transit during clearing process, the bank would provide all assistance to the customer to obtain duplicate instrument from the drawer of the cheque. The bank would compensate the customer for any reasonable charges he/she incurs in getting duplicate cheque/instrument upon production of receipt. In addition, the bank will pay interest on the amount of the cheque for a further period of 15 days at Savings Bank rate, which is 3.5%, to provide for likel;y further delay in obtaining duplicate cheque/instrument and collection thereof.

 Meanwhile, broadly, the policies formulated by banks should cover immediate credit for local/outstation cheques; time-frame for collection of local/outstation instruments; and interest payment for delayed collection. Banks are obliged to disclose their liability to you by way of interest payments due to delays for non-compliance with the standards set by the banks themselves. You are eligible to be compensated by way of interest payment even if no formal claim is lodged by you. The bank is obliged to disclose the amount up to which immediate credit of outstation cheque is offered in its comprehensive notice board, which is to be displayed at each and every branch of the bank.

 The bank is also required to disclose its policy with regard to immediate credit for local/outstation cheques, time-frame for collection of local/outstation instruments and policy for interest payment for delayed collection. This will be available in the information booklets which should be available at all bank branches. Banks are also required to put up their cheque collection policy on their websites.

 As far as the charges for outstation cheque collection are concerned, RBI has fixed ceilings on charges and banks cannot charge a customer beyond the prescribed ceilings. For cheques up to Rs 10,000, as per the RBI stipulations, banks can charge maximum Rs 50 per instrument. For cheques between Rs 10,000 and Rs 1,00,000, the charges cannot exceeding Rs 100 per instrument and for cheques of Rs 1,00,001 and above, the charges have been kept not exceeding Rs 150 per instrument. It is pertinent to mention that the customers are not liable to pay any additional charge like courier charges, out of pocket expenses, etc.

(The views are of the author & not the institution he works for. Feedback at sajjadbazaz@greaterkashmir.com)

*In respect of cheques lost in transit or in the clearing process or at the paying bank's branch, banks should immediately bring the same to the notice of the account holder so that the accountholder can inform the drawer to record stop payment and can also take care that other cheques issued by him are not dishonoured due to non-credit of the amount of lost cheques / instruments.
*The onus of such loss lies with the collecting banker and not with the account holder.
*The banks should reimburse the account holder related expenses for obtaining duplicate instruments and also interest for reasonable delays occurred in obtaining the same. 
* If the cheque / instrument has been lost at the paying bank’s branch, the collecting banker should have a right to recover the amount reimbursed to the customer for the loss of the cheque / instrument from the paying banker.

Lastupdate on : Sun, 27 Jun 2010 21:30:00 Mecca time
Lastupdate on : Sun, 27 Jun 2010 18:30:00 GMT
Lastupdate on : Mon, 28 Jun 2010 00:00:00 IST