A check bounce is an offense that violates Section 138 of the Negotiable Instruments Act, 1881 (“Act”), which can result in a fine that can reach twice the amount of the check or imprisonment for a period not exceeding two years, or both. When a payee presents a check for payment to a bank, and the bank returns the check unpaid with a memo stating that there are insufficient funds on file, which results in check bounced case.

It is possible for a check to bounce for a variety of reasons, but if the check bounces due to insufficient funds in the drawer’s account, then it constitutes an offense under the Act if the check bounces. When presenting a check for payment, the bank must reject it with a return memo stating that insufficient funds were found to be the reason for the rejection. When this happens, the payee of the check can send a check bounce notice to the drawer, demanding payment of the amount shown on the check.

A new rule regarding cheque bounces in India

RBI has issued a notice in early August of 2021 requiring customers who use checks heavily or plan to use checks to maintain a minimum bank balance. The check will bounce if this minimum balance is not maintained. Furthermore, the customer who issued the check may have to pay a penalty fee. The RBI also announced that the National Automated Clearing House (NACH) would operate 24 hours a day.

Neither national banks nor private banks are exempt from these changes. Checks are now cleared faster and more smoothly as a result of the rule change. Sundays will also be a day when checks can be processed and cleared because the new rule ensures that NACH is operational every day of the week.

What Causes Cheques to Bounce

Checks bounce for a variety of reasons, including:

Insufficient account balance – When there is not enough money in the drawer’s account to cover the cheque payment, the bank will reject and return it cheque to the payee stating that insufficient funds on the account.

Expired validity of cheque –  When there is not enough money in the drawer’s account to cover the cheque payment, the bank will reject and return it to the bank within three months.

Overwriting – When there is not enough money in the drawer’s account to cover the cheque payment, the bank will reject and return it

Damaged cheque – When there is not enough money in the drawer’s account to cover the cheque payment, the bank will reject and return it

Signature mismatch – When there is not enough money in the drawer’s account to cover the cheque payment, the bank will reject and return it

Mismatch of amounts or digits – When there is not enough money in the drawer’s account to cover the cheque payment, the bank will reject and return it