Madras HC advises RBI and FinMin on positive remuneration system for high value checks
Madurai High Court Madras Court has issued an opinion to the Reserve Bank of India (RBI) and the Union Ministry of Finance regarding a Public Interest Litigation (PIL) petition filed against the challenge to the compulsory positive remuneration system in the country.
Litigator K Krishna, a lawyer from Madurai, challenged the RBI’s notification and claimed that the positive pay system defeats the purpose of the Negotiable Instruments Act, 1881.
The Positive Pay System is a new process to reconfirm key details of high value checks.
According to this positive payment system, the issuer of the check must submit specific details of that check (such as the date, name of the payee or payee and the amount of the check) to the bank drawn electronically through channels such as SMS, mobile app, internet banking or automated teller machines (ATM). The details are then cross-checked with the check presented by the Check Truncation System (CTS). The system alerts both the drawn bank and the presenting bank in the event of a discrepancy. An appeal mechanism is in place at both ends to resolve the matter.
Mr. Krishna pointed out that due to the new RBI notification, the system, which was optional, is now made mandatory by all banks for payments over Rs 50,000. Although the goal of the system is to prevent check fraud, the lawyer expressed concern that this could lead to more fraud.
“It would be very easy for the fraudsters to issue the check and then submit the wrong information through a positive payment system so that the payee does not receive the amount,” he said, asking the HC to cancel the payment. RBI notification.
A division bench of Judges M Duraiswamy and K Murali Shankar, who heard the petition, issued the opinion and adjourned the hearing until November.
The National Payments Corporation of India (NPCI) created the Positive Pay System to revalidate the essential details of high value checks.
The Indian government implemented the “positive remuneration system” from September 1 to guard against the falsification of check transactions. The RBI introduced the mechanism to strengthen the security of high-value financial transactions. It made it compulsory for banks that customers must be informed of the procedure.
All account holders issuing checks of Rs 50,000 and more will be able to use it, according to the banks. While it is up to the account holder whether or not to use this service, banks may consider making it mandatory for checks of Rs5 lakh or more, as suggested by RBI.
Some banks advise customers that if the details of high value checks are not pre-registered, the check will be returned. When issuing a high value check, customers should confirm that the details are submitted within the time frame suggested by banks for faster customs clearance. RBI has advised that only checks registered in PPS will be accepted under the dispute resolution mechanism. Customers would receive an SMS indicating whether the check is accepted or rejected for any reason.