Finance ministry has advised banks to popularise the electronic funds transfer system to reduce usage of Cheques & bank drafts that are prone to fraud, assuring them electronic transfer of funds will have same legal protection as the traditional banking instruments.
According to a finance ministry official, ''We have examined the matter and told banks that this (Dishonour of e-payment) will involve the same penalty clause as in the case of a bounced cheque. Emphasizing customers will not be legally disadvantaged if they opted for electronic transfer instead of cheque payments"".
Officials believe increased awareness can help electronic funds transfer become more acceptable among customers.
Banks agree that increased use of electronic transfers can help track financial transactions and investigate frauds easily.
There is a lot of frauds that happen on account of cheques/drafts. In case of electronic transfers, such fraudulent activities will be curtailed and easily tracked.
India’s largest lender, SBI (State Bank of India), has already decided to close the accounts of those customers who default on their cheques 4 times or more in a financial year.
Bankers had recently expressed some concern over the legal implications of electronic transfers in case of inadequate funds in the user’s account.
The government, in its note to banks, has clarified that the Payment and Settlement Systems Act 2007 accords legal recognition to electronic payment systems and provides for punishment of 2 years and a “Section 25 of the Payment and settlement Act 2007 gives the same right and remedies to the beneficiary in cases where electronic settlements are dishonoured similar to cheque bouncing cases,” explained Hitendra Mehta, Partner, Vaish Associates Advocates
The RBI (Reserve Bank of India) has also been keen to move away from cheques and drafts.
Last week, the RBI had reduced the validity period of cheques, drafts, pay orders or banker's cheques to 3 months from 6 months. Monetary penalty twice the amount of electronic funds transfer, or both in case of dishonour.
Src: ET
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