5 main reasons for cheques to bounce in India


reasons for cheque bounce

One of the most common financial offences in India is Cheque Bounce. A bounce cheque simply means that bank refuses to honour and is intimated to the issuer and the receiver. Banks and vendors frequently charge fees for bounced cheque, sometimes exceeding the amount for which the cheque was written.

5 main reasons for cheques to bounce in India

Reason 1: Insufficient funds

One of the most common and main reason for cheque bouncing is insufficiency of funds in the account from which the cheque is issued. On the occurrence nominal penalty shall be levied on both the depositor and the issuer as well. The receiver of the cheque has the option to take legal action against the issuer for non-payment and dishonour of the cheque.

Reason 2: Signature Mismatch

If the signature does not match the banks records or is mismatched, then your cheque will bounce. Also, if the signature is on the MICR band of the cheque, then the cheque will bounce. 

Reason 3: Stop payment order

Drawer may order stop payment in case where he comes to know anything ambiguous. Any other authority: such as Government, Court etc. can also order for stop payment.

Reason 4: Cheque date

Any problem or incorrect date is also one of the reasons for cheque bounce. It may so happen when the date is not clearly readable or scribbled. Also, cheque is valid only for a period of 3 months from the date mentioned on the cheque. Post 3 months the cheque is expired and the request for clearance of such cheque shall be dishonoured by the bank. The other issue is Post Dated Cheques being deposited earlier than they are due. Post Dated Cheques (PDC)is cheque where cheque is issued on a present date for a future date.

Reason 5: Account blocked

When the Account of the drawer is blocked temporarily or permanently in case the documentation for maintain the account are not submitted by the drawer the cheque will bounce. Also, when the Account no longer exist reason being account closed and the payee deposits the cheque, the cheque shall bounce.

Other reasons for cheque bounce includes

  • If the cheque is damaged, torn or has some details not clearly visible.
  • Any scribbling, overwriting, correction etc on a cheque is found; with no signature it will be dishonoured.
  • If the cheque has difference in amount in words and numbers, then the bank will bounce the cheque.
  • In case of alteration done and there is no counter signature the cheque shall bounce
  • If there is mismatch in single number in the account or name mismatch cheque gets rejected.

Hope you find above information useful. Do share your views below.

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