Frequent default of cheques can lead to closure of your account

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Those writing cheques without adequate funds in their account risk having theiraccount blocked, a measurethat will further tighten the regime around bounced cheques.

India’s largest lender, the StateBank of India , has decided to close the accounts of those customers who default on their cheques too frequently, a lead other banks are sure to follow.

An internal circular of the bank has asked officials to close the accounts of those customers whose cheques have bounced four times or more in a financial year.

The new norm will be applicable for those who do not maintain enough balances to meet their standing instructions for electronic clearing services where the bank is authorised to debit regular payments directly to their accounts.

Other banks, both public and private, may soon follow as the issue has been informally discussed amongst public sector banks, said a senior person in the Indian Banking Association (IBA).

“Banks are expected to enforce financial discipline amongst its customers,” he said, adding that a month’s notice will be issued, giving customers ample time.

The SBI directive reinforces the central bank’s attempts to penalise the deliberate default by the cheque issuer. An email sent to the bank remained unanswered until the time of filing this story.

If the information on such closed accounts is shared among banks, or with the institutions that maintain credit scores of individuals, defaulters would find it difficult to access financial services or the costs of such services will go up for them sharply.

RBI rules allow banks to stop issuing new cheque books to those customers that have had their four cheques of Rs 1 crore, or more, dishonoured for want of sufficient funds in the account.

The central bank has also issued guidelines on how much a bank can charge for bounced cheques. Private sector lender, ICICI charges `100 for every cheque returned for financial reason if deposited by the customer. The penalty amount goes up to `350 if it is issued by the customer.

There are over 30 lakh cheque bounce cases pending in the court. Cheque bouncing was made a penal offence in 1989. In a May, the Supreme Court had also said any delay in settling cheque bouncing case will cost the defaulter up to 20% of the cheque amount.

As of now, if an offence is committed by a company for dishonouring cheque under Section 138 of the Negotiable Instruments Act, all those who were directors of the company, except those exempt by the law, are held responsible.