February 2, 2018

Sreekanth B

What are the Main Reasons for Cheque Bounce

If you think this can be a very simple thing as to why your cheque may bounce it is not. There are lot of factors to it, and here I am discussing the same today. Or at least we think we know but at times ignore some important things for dishonour of cheque.

Here are main reasons why your cheque bounced:

Cheques are used by a vast majority of people having bank accounts, the number of people with bank accounts has gone up. While not all people having a bank account use cheques, most us do so and we think we know all about writing cheques while infact a lot of us don’t. Even if we do know about writing cheques, are we fully aware of reasons why a cheque bounces? Or what is a bounced cheque?

Well a bounced cheque simply means a cheque that the bank refuses to pass or honour and is intimated to the issuer and the receiver and a nominal penalty is charged. A bounced cheque also invites legal action is the receiver wishes so, and there are often cases where in cheque dishonour of significant amounts has invited criminal charges. Hence it becomes vital for one to know the typical reasons why a cheque can bounce.

1. Insufficient Funds:

Lack of funds in the account from which the cheque is issued is among the main and most common reasons for the cheque to bounce. If you have issued or have received a cheque linked to an account that has less amount of money than the once written on the cheque, then the bank will not find the enough money to complete the transaction and hence will stop the payment and dishonour the cheque. It will also levy a nominal penalty on both parties – the issuer and the depositor for this. After this the issuer can either issue a new cheque or settle the matter with the receiver/depositor of the cheque; or the receiver of the cheque has an option to initiate legal action against the issuer for non-payment and dishonour of the cheque. Hence it is advised to always be careful while issuing the cheques and make sure you have sufficient balance in the account.

2. Problems with Date of the Cheques:

As discussed in our post ‘How to Write a Cheque in India’; the date is very important part of the cheque and any difference or problem in the date will lead to your cheque being bounced. Yes, date can lead to a bounced cheque. The typical problem with the date can be that the date is disfigured or has some mistake, or is not readable or scribbled, will lead to your cheque bouncing.

Also, the other reason is that the date has expired or in other words, the date on the cheque is more than 3 months old, from the current date. A cheque is only valid for 3 months from the date that is mentioned in its date column. For example if the date on the cheque is mentioned as 12/02/2015 then it will be valid only till 11/05/2015. So with that requirement, if you have a cheque with a date 11/11/2014; that cheque is not valid as of 12 Feb 2015. In such a case where a cheque with an expired date is submitted, the bank will dishonour the cheque.

The other issue is Post Dated Cheques being deposited earlier than they are due. Post Dated Cheques or PDC are cheques where cheque is issued for a future date. For example, I could issue a cheque to you on the 12th of Feb 2015 for any date in the future; like say for instance 14th November 2015. If you were to then deposit the cheque anytime before 14th of November 2015, then the bank will dishonour the cheque and the cheque will bounce.

3. Signature Mismatch:

Again, a very common reason for a cheque to bounce in India. If the signature is mismatched, or does not match the banks records, then your cheque will bounce. Signature is very important and we also discussed this part in ‘How to write a cheque in India’ article. If the signature is not as per the bank records then they will dishonour your cheque. Also if you happen to sign on the MICR Band on the cheque, then the cheque will bounce. So be careful with the signatures.

4. Difference in Amount in Words and Numbers:

If the cheque happens to have any difference in the amount payable mentioned in words and in numbers, then banks will bounce you cheque. This is also true if the amount mentioned in the words section, has numbers in it in any form and also if the amount in figures/numbers column has any words written in that.

For example: If you have a cheque wherein the amount written in the ‘Words’ section is say ‘Fifteen Thousand two hundred ninety nine’ only and the amount in figures mentioned in the amount column is 16,000/-; your cheque will be dishonoured, since the amounts do not match up.

Same would happen if the amount in words is mentioned as ’60 thousand’ only and in figure’s column it is 60,000/- even though the amounts are same the use of numbers in the words section is not allowed. Or even if you have a cheque like this, wherein amount in figures is written as 60 thousand/-, ofcourse that cheque will also bounce

5. Disfigured or Damaged Cheque:

If the cheque is damaged, torn, disfigured meaning it is not in a good condition or has some details not clearly visible; has too many stains for whatever reason etc., these types of cheques will bounce. So preserve the cheques properly.

6. Scribbling, Overwriting on Cheque:

Any kind of scribbling, overwriting, correction etc on a cheque is not allowed and if a cheque is found that way, it will be dishonoured. It is always good to issue a fresh cheque if you make a mistake while writing it. Also while receiving a cheque that has such thing, then ask for a new cheque.

These are typically the reasons for a cheque to bounce in India and it is good to know these, to stay away from any unwanted hassle or trouble. Apart from the above reasons, if the bank finds the cheque to be suspicious or forged for some reason, it will dishonour the cheque, resulting in a bounced cheque.

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