Positive Pay System for cheques is an enabler, and we all ought to use it for any high value cheques that we issue.
Introduction
Reserve Bank of India (RBI) had announced introduction of Positive Pay System for Cheque Truncation System (CTS) 2010.
History of Positive Pay
National Payments Corporation of India (NPCI) has developed the facility of Positive Pay in CTS and made it available to participant banks. Banks, in turn, have enabled it for all account holders issuing cheques for amounts of ₹50,000 and above.
The idea behind CTS
Cheques are a traditional way of transferring money, that is still prevalent today - in times of highly secure online banking. They are not as secure as modern electronic ways to transfer funds. If there is a high value cheque issued to someone, the chance of fraud goes up in the same proportion. PPS (Positive Pay System) is a way to make high value cheques more secure by validating them via the electronic mode of the issuer.
How does PPS work?
The concept of Positive Pay involves a process of reconfirming key details of large value cheques. Under this process, the issuer of the cheque submits electronically, through channels like SMS, mobile app, internet banking, ATM, etc., certain minimum details of that cheque (like date, name of the beneficiary / payee, amount, etc.) to the drawee bank, details of which are cross checked with the presented cheque by CTS. Any discrepancy is flagged by CTS to the drawee bank and presenting bank, who would take redressal measures.
Is it mandatory to adopt PPS?
No, it is not mandatory, but it is definitely recommended by banks and RBI. While availing of this facility is at the discretion of the account holder, banks may consider making it mandatory in case of cheques for amounts of ₹5,00,000 and above.
What if your cheque is not PPS compliant?
Only those cheques which are compliant with above PPS instructions will be accepted under dispute resolution mechanism at the CTS grids. Member banks may implement similar arrangements for cheques cleared / collected outside CTS as well
Is the PPS system already in force?
Positive Pay System has been implemented since January 01, 2021
RBI Circular
Ref Number: RBI/2020-21/41 DPSS.CO.RPPD.No.309/04.07.005/2020-21 September 25, 2020
Summary
Protection of our money is in our own hands. PPS is a great enabler. Whenever we are issuing cheques above ₹50,000, it is in our own interest to make sure we secure it via PPS. As they say, it is always better to be safe than sorry.
Regards,
Manoj Arora
Official Website
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