NEW DELHI: The new ‘Positive Pay’ mechanism introduced by the Reserve Bank of India (RBI) will make cheque payments safer and reduce instances of frauds. Issuers will be able to send all details to their bank, thereby ensuring faster clearance of cheques above Rs 50,000.
All cheques will be processed as per the information sent by the account holder at the time of issuance of cheques. This will cover approximately 20 per cent of transactions by volume and 80 per cent by value. The RBI will outline operational guidance in this regard soon.
What is Positive Pay mechanism?
Positive Pay is a fraud detection tool adopted by banks to protect customers against forged, altered or counterfeit cheques. It cross verifies all details of the cheque issued before funds are encashed by the beneficiary. In case of a mismatch, the cheque is sent back to the issuer for examination.
By following such a system, a bank knows of a cheque being drawn by the customer even before it is deposited by the beneficiary into his/her account.
How does the mechanism work?
Under Positive Pay feature, the issuer will first share the details of the issued cheque like cheque number, date, name of payee, account number, amount and the likes through his/her net banking account. Along with this, an image of the front and reverse side of the cheque is also required to be shared, before handing it over to the beneficiary.
When the beneficiary submits the cheque for encashment, the details are compared with those provided to the bank through Positive Pay. If the details match, the cheque is honoured. However, in case of mismatch, the cheque is referred to the issuer. In this way, any cheque where any sort of fraud has happened cannot be cleared at all and hence, a depositor’s money can be protected.
However, the RBI is yet to announce operational guidelines regarding the mechanism.
Private sector lender ICICI Bank adopted this feature in 2016 for all cheques, irrespective of the amount, via its iMobile application. Cheque images and information are available for validation only on the next working day.