You must have came across a common term related to bank that is “cheque bounce”. This term basically means refusal by bank to make payment of a cheque. In this article, we will learn in deep the true meaning of cheque bounce and the causes that leads to cheque bounce or dishonour of Cheque.
Cheque bounce is a situation when bank refuses to make payment of a Cheque to the cheque presenter quoting some valid reasons. “Cheque bounce” is also called dishonour of cheque. Both terms have similar meaning. If the cheque is dishonoured, no matter the reason is, the bank imposes a penalty upon the cheque drawer for such negligence, such charges are called “cheque bounce charge.
When can a bank refuse payment of a cheque ( Dishonour of Cheque )
- Insufficient balance: When the account balance of the customer is insufficient to meet to amount stated in the cheque. In easy words, if the person who has drawn the cheque has less amount in his account balance and has drawn a cheque for a higher amount that what he actually has presently in his account. Then in that case, it would lead to dishonor of cheque or cheque bounce.
- Post dated Cheque ( Stale ): Every cheque has a date which is specified on its top. If the date mentioned on the top of the cheque is a future date then the payment against such cheque would be rejected until the date becomes present date or past. Bank never makes a payment of a cheque which has a future date specified on it. Such cheque with a future date can only be encashed on the same date specified on it and not before.
- Not drawn properly: If the drawer of cheque has not properly drawn the cheque like the date on the cheque is not mentioned or overwriting made on the cheque, thus factor would lead to cheque bounce.
- Stops payment Order: If the customer whose has drawn the cheque has directed bank to not make payment against that serial number cheque, he has given to another person for payment.
- Non tally of Signature: When the signature of the cheque drawer does not tally with the specimen signature he gave to the bank at the time of account opening, then payment against such cheque would be rejected.
- Defect in the title: When the bank comes to know that there is a defect in the title of the person specified in the cheque or the person presenting the cheque, then the cheque would be refused for making payment. People open bank account with a predetermined aim. Where some open to promote their saving on the other hand there are even some customer who open bank account with a wrong intension, like to carry out fraud activities, deceive someone, etc. Thus if the bank comes to know about such customer whose name is specified in the cheque and are connected with fraud activities related to bank thus payment for such person are detained, causing cheque to bounce.
- Notice of customer’s insolvency or death: Before making the payment against the cheque if the bank comes to know that the about cheque drawer death or in case of company insolvency status, then the bank rejects to make payment against such cheques.
At the time of cheque drawing, the drawer should ensure that he fully abides by the rules pertaining to proper cheque drawing because failing to abide by it may cause inconveniece to both him and the cheque payee.