Explained | Positive Pay System for Cheque – How does it work ?

What is Positive Pay System
What is Positive Pay System

Positive Pay System (PPS) for cheque implemented from Jan 1, 2021 for all cheque payments above Rs. 50,000/- to enhance the safety and combat bank frauds especially by Cheque Payments. With increasing frauds through cheque payment system, there was need of such system to ensure the safety of cheque payments.

What is Positive Pay System for Cheque?

Positive Pay System (PPS), developed by National Corporation of India (NPCI), involves the process of reconfirming the key details of large value cheques.

What is Positive Pay System for Cheque
What is Positive Pay System for Cheque

In PPS, the issuer of the cheque submit certain essential details of the cheque like date, name of the beneficiary /payee, amount etc. to the drawee bank. The details can be submitted electronically, through SMS, bank mobile app, internet banking, ATM etc. Drawee Bank cross check the details with the presented cheque by CTS. If any discrepancy, is flagged by CTS to the drawee and presenting bank, who would take redressal measures.

How Does Positive Pay System Works?

RBI issued guidelines for banks to implement the positive pay system from Jan 1, 2021 to ensure safety of cheque payments against frauds.

As it is the process of reconfirming key details of the large value cheque.

How Positive Pay System Works
How Positive Pay System Works

In this process,

  • Issuer of cheque submits key details (like cheque number, issue date, beneficiary name, amount etc.) through electronic mode – SMS, Mobile App, Internet Banking, ATM etc. to the drawee bank.
  • Drawee bank use this detail for processing or clearing the cheque. So, details need to be submitted before handing over the cheque to beneficiary.
  • When cheque is presented for clearance in Cheque Truncation System (CTS), drawee bank cross check the details with presented cheque.
  • If details match with presented cheque in CTS, the cheque is honored by drawee bank.
  • In case of any mismatch, the discrepancy is flagged by CTS to both drawee and presenting bank, who would take redressal measure and the cheque will be returned unpaid.
  • In case of non submission of details by issuer, cheque with value amounting to 5 lakhs and above will be returned with the reason “Positive Pay details not available”.

What is the detail of cheque submitted in positive pay system?

Following key detail is required in PPS –

Key Details in Positive Pay System
Key Details in Positive Pay System
  • Beneficiary Name /Payee
  • Cheque Number
  • Account Number
  • Cheque Date
  • Cheque Amount
  • MICR Code
Cheque Details to be Submitted in Positive Pay System
Cheque Details to be Submitted in Positive Pay System

How to Submit the Cheque details in positive pay system?

This detail can be submitted electronically through the following channels –

  • Branch
  • Mobile Banking App
  • Internet Banking
  • Call Centre
  • SMS Channel

Is Positive Pay System Mandatory?

As directed by RBI, Positive Pay System facility is enabled by the banks for all cheques amounting to 50,000/- and above the value. It safeguards the customer against any fraud related to cheque payments.

However, it is at customer’s discretion to avail this facility. Bank may consider making it mandatory in case cheque amount exceeds 5 lakh and above.

Why it is important for customers?

There are various incidents reported by the banks that fraudster gets the account information and reprint the duplicate cheque book. Then these cheques are used to withdraw money from accounts by fraudster. Therefore, to combat such cheque related frauds, RBI directed all banks for implementation of positive pay system from Jan 1, 2021 for all payments by cheque. If you are issuing any cheque above this amount, you must be aware about it.

If you don’t pre register the details of large value cheque, it would be returned by the bank. So make sure that key details or information is submitted within the timeframe as specified by your bank before issuing high amount cheque.

The cheque must be compliant with the instruction discussed above to be accepted under dispute resolution mechanism at the CTS grids.

What is the benefit of Positive Pay System?

The key benefit of PPS is FRAUD PREVENTION. If issuer of cheque submit details through PPS and bank still clear the fraudulent cheque, the onus is on the bank and not on the customer.

Thus, it provides protection to customers who are issuing the cheque. Even if your bank is not making it mandatory, we will suggest you to opt for this facility to avoid falling victim to fraud.

Final Thought

Positive Pay System is going to benefit both to issuer and beneficiary of the cheque. Also the bank will also get benefited as it will help them to reduce cheque payment related frauds significantly. For issuer, positive pay system will prevents fraudulent encashment of cheques from his/her account.

This system has been implemented by banks from Jan 1, 2021 but still there is lack of awareness among customers. Banks are spreading awareness among customers through SMS, advertisements about this new feature. With help of this feature, any forged or duplicate cheque will be averted from clearance and depositor’s money remain protected.


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