ACH Submitted Prior Date Without Any Communication And Making Bounce Charges

Dear Sir, You can be jailed for default in fund transfer via ECS If you pay your loans through the electronic clearing service, you better ensure there is sufficient fund in your account. Else, you can land up in jail, according to a latest circular from the Reserve Bank of India. Increasingly, people are opting to repay loans or other financial commitments electronically by giving a mandate to banks for monthly deduction from their accounts on a specified date instead of giving post-dated cheques. But many of these commitments are apparently not being honoured as there is no clarity on the punishment. However, in a circular sent to banks a couple of weeks ago, the apex bank communicated that the same set of rules against dishonour of cheques, according to Section 138 of the Negotiable Instruments Act, 1881, would apply for dishonour of electronic fund transfer instruction. “Section 25 of the Payment and Settlement Systems Act, 2007 accords the same rights and remedies to the payee (beneficiary) against the dishonour of electronic funds transfer instruction as are available to the payee under the Negotiable Instruments Act,'' the RBI said. IMPLICATIONS The implications of this circular for individuals and banks are significant. “This is a welcome clarification as it brings parity between cheque-based payments and electronic fund transfers,'' Mr Nagesh Pydah, Chairman and Managing Director, Oriental Bank of Commence, told Business Line. According to a senior official of Andhra Bank, many loan repayments through ECS mandate submitted to a bank are regularly dishonoured while maximum care is taken to honour post-dated cheques. Most of these commitments are not being honoured as there is no clarity on punishments prescribed legally till now while remedies are available for dishonour of cheques. “As a result, banks are also collecting a few post-dated cheques even for electronic funds transfer commitments,'' said an HDFC Bank functionary. More teeth to banks “The RBI's circular will give banks more teeth to ensure that the repayments through electronic mode would be more regular,'' he added.