RBI to introduce Positive Pay System to check Cheques

Published: September 26, 2020

The Reserve Bank of India is to introduce “Positive Pay System” from January 2021. The system makes it mandatory to re-confirm key details of cheques that need payments beyond Rs 50,000.

Highlights

Under the new system, the issuer of the cheque will have to submit details of the cheque such as name of the beneficiary, date, amount of the drawee bank, payee electronically through SMS. Apart from SMS, the issuer can submit the details through internet banking, mobile app or ATM as well. These details are to be cross checked before the cheque is presented for payment. In case of discrepancies during the Cheque Truncation System, redressal measures are to be undertaken.

The National Payments Corporation of India is to develop facilities of “Positive Pay” in Cheque Truncation System. However, this is applicable only to those account holders issuing cheques for amounts greater than Rs 50,000.

In order ease the usage of the system, the RBI is to set up an innovation hub in the country. Also, it will introduce Online Dispute Mechanism soon.

Background

The system is to be implemented from January 1, 2021. The Reserve Bank of India has instructed the banks to create adequate awareness among customers on features of positive pay system through display in branches and through SMS alerts. The RBI has also announced that only those cheques that are compliant with the Positive Pay System are accepted under Dispute Resolution Mechanism at CTS grids.

Cheque Truncation System

It is an image-based clearing system. It was launched in 2010. It is based on cheque truncation. Cheque Truncation is clearance of cheques through digital means. It involves data matching and verification. Prior to this, MICR was in use. It is Magnetic Ink Character Recognition Code.

Positive Pay Mechanism in India

The system is already in use in India. The ICICI bank has been following this procedure since 2016.

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