How RBI's Positive Pay System Protects Against Cheque Fraud
The Reserve Bank of India's Positive Pay System (PPS) combats cheque fraud by verifying details for cheques of Rs 50,000 or more
With the increasing complexity of fraud methods in the country, cheque fraud is one less worry thanks to the Reserve Bank of India’s implementation of the Positive Pay System (PPS) in 2021. This system adds an extra layer of security, ensuring that every large transaction is verified before being processed.
How The Positive Pay System Works
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The Positive Pay System is designed to protect against fraud by requiring account holders to share specific details with their bank before issuing a cheque of Rs 50,000 or more. These details include the cheque number, date, amount, and payee name.
When a cheque is presented for clearing, the bank compares the submitted information with the physical cheque. Any discrepancies are flagged for investigation, thus preventing cheque-based fraud.
Mandatory For High-Value Cheques
Currently, the PPS is mandatory for cheques of Rs 5 lakh and above processed through the cheque transaction system. Since October 1, 2024, banks have mandated the use of PPS for cheques of Rs 2 lakh and above presented in the CTC and cheques of Rs 5 lakh and above for transfer transactions.
If the customer fails to submit the PPS mandate for these high-value cheques, the bank will return the cheque, citing ‘Advice Not Received’.
Issuing A Cheque With PPS
Issuing a cheque with PPS is straightforward. The drawer must submit the cheque details, that is, cheque number, date, amount, and receiver’s name, 24 hours before presenting the cheque for clearing.
This can be done through internet banking or manually over the counter. Banks then match this information with the presented cheque. In case of minor errors, a verification process is carried out to confirm its authenticity.
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