The Reserve Bank of India (RBI) has introduced a ‘Positive Pay’ system to reduce frauds related to cheque payments.  The Positive Pay system, effective from 1st January, 2021, will be applicable for cheque payments of Rs. 50,000 and above.

Under the Positive Pay system, the cheque issuer has to reconfirm the important details for payments electronically. For that the issuer has to submit some details related to the cheque, such as cheque date, cheque number, account number, beneficiary name, payee name, amount, etc. to the drawee bank through SMS, net banking, mobile application, ATM, etc.  

Afterward, the Cheque Truncation System (CTS) will match these details with the presented cheque. If the details match, the cheque will be passed for payment. In case the details mismatch, CTS will notify about it to the drawee and presenting bank, who will then take redressal measures. 

RBI asked the National Payments Corporation of India (NPCI) to make the Positive Pay facility available for the participant banks by which they can connect to the CTS and can verify cheque details.  

National Payments Corporation of India to make a facility available to Indian lenders by which they can link directly to the CTS to verify data quicker.  

The Positive Pay facility is not mandatory for all the account holders.  However, banks may make the Positive Pay system mandatory for cheque transactions of Rs 5,00,000 and above. 

RBI has advised all the banks to create awareness among their customers about the Positive Pay system via SMS alerts, ATMs, their website, internet banking and display in branches. 

 RBI Governor Shaktikanta Das said that the Positive Pay system will help to reduce chances of fraud related to cheque payments and will cover 20% and 80% of total cheques issued by both volume and value, respectively.  

Though the Positive Pay system has been available for banks since 2018, all banks haven’t used it till now. Most large banks have their own internal system to reconfirm payment details. Smaller banks are not willing to implement this service because of the infrastructure cost associated with the system, or maybe they don’t have many cases of fraudulent cheque transactions. 

Recently, State Bank of India posted on Twitter that it has implemented the Positive Pay system for cheque transactions. Now, account holders, who opt for the Positive Pay facility, will have to upload the cheque details electronically.  

According to the RBI report, the banking system reported 202 cases of cheque fraud amounting to Rs 39 crore during April 2019 to March 2020 and 76 cases of cheque fraud from April 2020 to September 2020.  

The positive Pay system will definitely help in safer cheque transactions.