December 21, 2024

Positive Pay System Should Be Enforced In A Unfiorm Manner

By Linus Garg
First publised on 2022-09-26 09:00:52

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Linus tackles things head-on. He takes sides in his analysis and it fits excellently with our editorial policy. No 'maybe's' and 'allegedly' for him, only things in black and white.

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Although the positive pay confirmation system(PPS) , to prevent banking frauds related to high value cheques, was introduced by the RBI in January, 2021, a lot of confusion still prevails in the minds of the customers since the RBI had not made it mandatory. It is only now that it has advised banks to make the PPS mandatory for cheques above Rs. 500000.

Since PPS is not mandatory for cheques up to Rs. 500000, it has been left to the discretion of the banks to introduce the system as per their own threshold. There are many complaints from customers that different banks are following different thresholds for PPS. For instance, Bank of Baroda (BoB) (and some other banks) requires that customers intimate it (there are many channels for doing so) whenever they issue a cheque of more than Rs 50000 to anyone. On the other hand, SBI requires this only for cheques above Rs 500000.

While PPS is a good step by the RBI, the lack of clarity in enforcing it with uniformity in the banking system is troubling customers. For instance, an SBI customer, knowing that the requirement for PPS is for cheques above Rs 500000, deposits a cheque of Rs. 100000 of BoB received from a customer. The cheque is returned unpaid by BoB with the remark "advice not received". The SBI customer did not feel the need to ask his payer whether he had informed his bank through PPS as he thought the limit was Rs. 500000. The BoB customer was perhaps not aware that the requirement in his bank was for cheques above Rs. 50000.

This can be solved by the RBI issuing an order making PPS mandatory with a uniform threshold for all banks and prevents banks from setting their own thresholds. That would prevent such bouncing of cheques and disputes between traders.