Understanding Cheque Returns in Banks
1. Reasons for Cheque Returns:
- Insufficient Funds: One of the most common reasons for cheque returns is when the issuer’s account doesn’t have enough money to cover the amount specified on the cheque.
- Signature Mismatch: If the signature on the cheque doesn’t match the signature the bank has on record for the account holder, the cheque may be returned.
- Stale-Dated Cheques: Cheques presented to the bank after a certain period (typically six months) from the date of issue may be considered stale and could be returned.
- Technical Issues: Sometimes, cheques are returned due to technical errors like incorrect account numbers, improper date formats, or discrepancies in the payee name.
- Stop Payment Requests: A cheque may be returned if the issuer has requested a stop payment on it before it is processed.
2. Consequences of Cheque Returns:
- Fees: Banks often charge fees for processing returned cheques, which can vary depending on the bank’s policies and the type of account.
- Legal Ramifications: In some cases, repeated cheque returns or intentional issuance of bad cheques can lead to legal action and damage to the issuer’s credit score.
- Impact on Relationships: For businesses, bounced cheques can strain relationships with vendors, suppliers, and customers, leading to a loss of trust and credibility.
3. Handling Cheque Returns:
- Notification: Banks typically notify the account holder when a cheque they issued is returned, along with the reason for the return.
- Resolution: Depending on the reason for the return, the account holder may need to take action such as depositing sufficient funds, correcting errors, or issuing a new cheque.
- Prevention: To avoid cheque returns, account holders should ensure they have enough funds in their account, double-check all details before issuing a cheque, and promptly address any issues raised by the bank.
4. Bank Policies and Procedures:
- Each bank may have its specific policies and procedures regarding cheque returns, including the timeframe for processing returned cheques and the fees charged.
- It’s essential for account holders to familiarize themselves with their bank’s policies to understand how cheque returns are handled.
Conclusion: Understanding cheque returns in banks is crucial for account holders to manage their finances effectively and maintain positive relationships with banking institutions and counterparties. By knowing the reasons for cheque returns, the consequences involved, and how to handle them, individuals and businesses can navigate cheque transactions more efficiently and minimize the risk of encountering issues.
Reason For Return
| CODE NO. | REASON FOR RETURN |
|---|---|
| (01-03) | Funds |
| 01 | Funds insufficient |
| 02 | Exceeds arrangement |
| 03 | Effects not cleared, present again. |
| (04-05) | Reference to Drawer |
| 04 | Refer to drawer |
| 05 | Kindly contact Drawer/Drawee Bank and please present again. |
| (10-17) | Signature |
| 10 | Drawer’s signature incomplete |
| 11 | Drawer’s signature illegible |
| 12 | Drawer’s signature differs |
| 13 | Drawer’s signature required |
| 14 | Drawer’s signature not as per mandate |
| 15 | Drawer’s signature to operate account not received |
| 16 | Drawer’s authority to operate account not received |
| 17 | Alteration requires drawer’s authentication |
| (20-29) | Stop Payment |
| 20 | Payment stopped by drawer |
| 21 | Payment stopped by attachment order |
| 22 | Payment stopped by court order |
| 23 | Withdrawal stopped owing to death of account holder |
| 24 | Withdrawal stopped owing to lunacy of account holder |
| 25 | Withdrawal stopped owing to insolvency of account holder |
| (30-42) | Instrument |
| 30 | Instrument post dated |
| 31 | Instrument out dated/stale |
| 32 | Instrument undated/ without proper date |
| 33 | Instrument mutilated; requires Bank’s guarantee |
| 34 | Cheque irregularly drawn/ amount in words and figures differs |
| 35 | Clearing House stamp/ date required |
| 36 | Wrongly delivered/ Not drawn on us |
| 37 | Present in proper zone |
| 38 | Instrument contains extraneous matter |
| 39 | Image not clear, present again with paper |
| 40 | Present with document |
| 41 | Item listed twice |
| 42 | Paper not received |
| (50-55) | Account |
| 50 | Account closed |
| 51 | Account transferred to another branch |
| 52 | No such account |
| 53 | Title of account required |
| 54 | Title of account wrong/ incomplete |
| 55 | Account blocked (situation covered in 21-25) |
| (60-68) | Crossing/Endorsement |
| 60 | Crossed to two banks |
| 61 | Crossing stamp not cancelled |
| 62 | Clearing stamp not cancelled |
| 63 | Instrument specially crossed to another bank |
| 64 | Amount in protective crossing incorrect |
| 65 | Amount in protective crossing required/illegible |
| 66 | Payee’s endorsement required |
| 67 | Payee’s endorsement irregular / requires collecting bank’s confirmation |
| 68 | Endorsement by mark/ thumb impression requires attestation by Magistrate with seal |
| (70-76) | RBI /Government |
| 70 | Advice not received |
| 71 | Amount / Name differs on advice |
| 72 | Drawee bank’s fund with sponsor bank insufficient |
| 73 | Payee’s separate discharge to bank required |
| 74 | Not payable till 1st proximo |
| 75 | Pay order/ cheque requires counter signature |
| 76 | Required information not legible/ correct |
| (80-92) | Miscellaneous |
| 80 | Bank’s certificate ambiguous/ incomplete/ required |
| 81 | Draft lost by issuing office/ confirmation required from issuing office |
| 82 | Bank/Branch blocked |
| 83 | Digital Certificate Validation failure |
| 84 | Other reasons-connectivity failure |
| 85 | Alterations on instrument- Other than “Date” field (Alteration/correction on instruments are prohibited under Cheque Truncation System. Return reason code applicable to instruments presented in CTS) |
| 86 | Fake/Forged/Stolen-draft/cheque/cash order/interest warrant/dividend warrant |
| 87 | ‘Payee’s a/c credited’- Stamp required |
| 88 | Other reasons (Please specify) |
| 92 | Bank Excluded |
Illustrative but not exhaustive list of objections where customers are not at fault
(Applicable for instrument and image-based Cheque Clearing as detailed in Annexure D to Uniform Regulations and Rules for Bankers’ Clearing Houses)
| Code No. | Reason for Return |
|---|---|
| 33 | Instrument mutilated; requires bank’s guarantee |
| 35 | Clearing House stamp/date required |
| 36 | Wrongly delivered/ not drawn on us |
| 37 | Present in proper zone |
| 38 | Instrument contains extraneous matter |
| 39 | Image not clear ; present again with paper |
| 40 | Present with document |
| 41 | Item listed twice |
| 42 | Paper not received |
| 60 | Crossed to two banks |
| 61 | Crossing stamp not cancelled |
| 62 | Clearing stamp not cancelled |
| 63 | Instrument specially crossed to another bank |
| 67 | Payee’s endorsement irregular/ requires collecting bank’s confirmation |
| 68 | Endorsement by mark/ thumb impression requires attestation by Magistrate with seal |
| 70 | Advice not received |
| 71 | Amount/ Name differs on advice |
| 72 | Drawee bank’s fund with sponsor bank insufficient(applicable to sub-members) |
| 73 | Payee’s separate discharge to bank required |
| 74 | Not payable till 1st proximo |
| 75 | Pay order/cheque requires counter signature |
| 76 | Required information not legible/correct |
| 80 | Bank’s certificate ambiguous/ incomplete/required |
| 81 | Draft lost by issuing office; confirmation required from issuing office |
| 82 | Bank/ Branch blocked |
| 83 | Digital Certificate validation failure |
| 84 | Other reasons-connectivity failure |
| 87 | ‘Payee’s a/c Credited’-Stamp required |
| 92 | Bank excluded |
