All You Need to Know about the “Positive Pay” System to Make Secure Cheque Payments In 2021
Listen to All You Need to Know about the “Positive Pay” System to Make Secure Cheque Payments In 2021
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Making payment by cheque has become a lot safer from January 1, 2021. As you might be aware, banks have started implementing the "Positive Pay System" for Cheque Truncation System as directed by the Reserve Bank of India (RBI).
The "Positive Pay System" will be applicable for all cheque transactions of Rs 50,000 and above, i.e. for 20% volume of cheque transactions, and will cover 80% transactions by value. The National Payments Corporation of India (NPCI) has been the developer for the Positive Pay facility (to make it available to participating banks).
How will the Positive Pay system function?
Before rendering the cheque to the beneficiary (the drawee bank), the issuer (i.e. the one presenting the cheque) will have to provide crucial information such cheque number, cheque date, payee name, account number, and amount among others to the bank for the re-verification purpose. The said information can be transmitted electronically using various means such as bank's mobile app, internet banking facility, SMS, via ATMs etc. Moreover, the issuer is required to upload the image of both sides of the cheque.
If the clearing system finds any discrepancy in the copy of the cheque received and the information provided by the issuer, the cheque will not be honoured. It is referred back to the issuer for further clarification. This may delay the payment by a day, as the rectified information will be available with the bank only after a day.
It will be optional for the issuers of the cheque to opt for Positive Pay facility if the cheque amount is Rs 50,000 or more but less than Rs 5 lakh. On the other hand, banks can insist on Positive Pay compliance if the cheque amount is Rs 5 lakh or more.
Only Positive Pay compliant cheques will be considered for dispute resolution, if there's any at a future date.
(Image source: freepik.com; photo courtesy welcomia)
How effective is the Positive Pay System likely to be?
Since the information about high-value transactions is already available with the bank before the beneficiary presents the cheque for payment, the detection of discrepancies may become easier for the clearing bank.
With the advent of digital payment options and the growing popularity of National Electronic Fund Transfer (NEFT) and Real-Time Gross Settlement System (RTGS), the popularity of cheques is ebbing out. According to RBI data, NEFT volume jumped 24.6% in November 2020 on a Year-on-Year (Y-o-Y) basis, while the growth in transaction value was 27.9% as compared to a year ago.
That said, a large section of society still uses cheque as the mode of payment, hence the Positive Pay System may work as the additional layer of security.
The RBI has advised banks to create adequate awareness among their customers on features of Positive Pay System through SMS alerts, display in branches, ATMs as well as through their website and internet banking.
Banks will be required to invest in technology to make a positive impact with 'Positive Pay'. Smaller banks and co-operative banks, who have not invested adequately in technology, may find it a challenge to offer the best customer experience.
Through 'Positive Pay', the subliminal message passed on is: start using mobile banking. This could perhaps serve the objective of improving the popularity of digital payments, particularly for high-value transactions. And if you still want to go with the conventional system of issuing cheques, follow safety measures using 'Positive Pay', which is in the interest of banks and customers.
During the COVID-19 lockdowns, the adoption of digital payment options went up substantially. Before the lockdowns were imposed, a large section of society was averse to buying groceries online. But when left with no other option, consumers have gradually begun to shop online. This reflects on the jump in e-commerce sales.
We can expect a similar wave of change in payment preferences too in the future. However, for 'Positive Pay' to be well-accepted, the user experience will be crucial.
Positive Pay System may have its limitations too...
Indians are not new to cheque frauds; we've witnessed forgery, counterfeiting, and cheque alteration, and other techniques fraudsters use. It would be farfetched to assume that Positive Pay can fix all these problems or even substantially reduce the instances of frauds.
Do you know, last year Delhi police busted a racket that conned bank customers through a cheque cloning scam. The modus operandi of fraudsters was worrisome!
The fraudsters colluded with bank officials who provided confidential information about customers having huge sums lying in their bank accounts. This included signatures and even blank cheques. Sometimes they colluded with the postmen as well to grab crucial information of account holders. Based on this information, the fraudsters got the legitimate mobile number registered against the account removed and update their own. They used cloned cheques to withdraw money from the bank account and the bank account holder. This racket duped people for nearly Rs 8 crore before police exposed them finally.
Do you think, the system of Positive Pay can take care of such high-level scams that involve even bank officials? [Share your views with us in the comment box below]
To ensure the safety of your bank account you should...
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Have a bank account only with a bank you can completely trust. This essentially means always bank only with well-reputed banks.
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Never park large sums only with one bank; like your investment portfolio, diversify your savings too.
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Be careful while sharing your bank account details with anyone, even for receiving the payment through NEFT, RTGS, or IMPS (Immediate Payment Service).
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Never give out a blank cheque without cancelling it carefully and provide proof of such cheques wherever it is absolutely necessary.
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Keep a track of account/s balance regularly.
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Regularly check personal details in the bank records and update them whenever required. Banking apps can help you cross-verify this information.
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Don't ignore any message sent by your bank, keep a close watch.
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Set a strong password for your mobile banking and internet banking facility.
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Never have the same password for your net banking facility and the email address provided against it.
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Be careful while swiping your card/s at hotels, malls, and petrol pumps.
No system can offer you protection unless you take care of your bank account. Safety starts first with your behaviour and the way you handle transactions. Take charge of your personal finances.
Warm Regards,
Rounaq Neroy
Editor, Daily Wealth Letter
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