The Reserve Bank of India on Friday vide notification no. UBD. BPD. (PCB) No. 15 /12.05.001/2011-12 dated 02.12.2011 directed primary urban cooperative banks not to make payments on cheques and other financial instruments that are over three months old, with effect from April next year. RBI directs that with effect from April 1, 2012, banks should not make payment of cheques/drafts/pay orders/banker’s cheques bearing that date or any subsequent date if they are presented beyond the period of three months from the date of such instrument, the Reserve Bank (RBI) said in a circular to all primary urban cooperative banks.
The directive comes a few weeks after the central bank issued similar directions to scheduled commercial banks and regional rural banks stating that such instruments will not be valid if they are over three months old.
“In India, it has been the usual practice among bankers to make payment of only such cheques and drafts as are presented for payment within a period of six months from the date of the instrument,” the circular said.
“RBI is satisfied that in public interest and in the interest of the banking policy, it is necessary to reduce the period within which cheques/drafts/pay orders/banker’s cheques are presented for payment from six months to three months from the date of such instrument,” it said.
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RBI/ 2011-12/288
UBD. BPD. (PCB) No. 15 /12.05.001/2011-12
December 2, 2011
The Chief Executive Officer
All Primary (Urban) Co-operative Banks
Dear Sir/ Madam
Payment of Cheques / Drafts / Pay Orders / Banker’s Cheques
In India, it has been the usual practice among bankers to make payment of only such cheques and drafts as are presented for payment within a period of six months from the date of the instrument.
2. It has been brought to the notice of Reserve Bank by Government of India that some persons are taking undue advantage of the said practice of banks of making payment of cheques / drafts / pay orders / banker’s cheques presented within a period of six months from the date of the instrument as these instruments are being circulated in the market like cash for six months. Reserve Bank is satisfied that in public interest and in the interest of banking policy it is necessary to reduce the period within which cheques /drafts/pay orders/banker’s cheques are presented for payment from six months to three months from the date of such instrument. Accordingly, in exercise of the powers conferred by Section 35A read with Section 56 of the Banking Regulation Act, 1949, Reserve Bank hereby directs that with effect from April 1, 2012, banks should not make payment of cheques/drafts/pay orders/banker’s cheques bearing that date or any subsequent date, if they are presented beyond the period of three months from the date of such instrument.
3. Banks should ensure strict compliance of these directions and notify the holders of such instruments of the change in practice by printing or stamping on the cheque leaves, drafts, pay orders and banker’s cheques issued on or after April 1, 2012, by issuing suitable instruction for presentment within the period of three months from the date of the instrument.
4. Please acknowledge receipt to the Regional Office of the Urban Banks Department concerned.
Yours faithfully,
(A.Udgata)
Chief General Manager -in-Charge
