Cheque Bounce Charges


Bank account holders often have the privilege of chequebooks that are issued by their respective banks that enable a secure payment. Since, real money is not involved in it - unless the receiving party decides it wants the amount in cash – the transaction is completely safe.

Definition of cheque

A cheque is a type of bill exchange or an order made to a financial institution to make a payment to another party. It is a commitment made by the drawer (issuer) to pay the mentioned amount to the payee (cheque recipient). While writing a cheque, the issuer must keep in mind certain considerations to avoid ‘dishonour of cheque’ and cheque bounce charges.

What is a cheque bounce?

A cheque bounce happens when a cheque is presented in a bank and returned unpaid for some reasons. Cheques could bounce for several reasons. Some of them are listed below.
- Insufficient funds in issuer’s account
- Incorrect information regarding

  • Amount mentioned
  • Mismatch in amount mentioned in figures and words.
  • Account number.
  • Name of payee.
  • Date.
- Drawer’s account is closed
- Signature mismatch,
- wrong company seal
- Overwriting, scribbling or scratching without authorisation
- Mutilated or damaged cheques
- Crossing limit of overdraft

Cheque bounce charges

If a cheque gets bounced due to insufficient money in the account of the issuer it amounts to a criminal offence and the banks can take action under Negotiable Instruments Act (NIA) 1881. The defaulter could be penalised or subjected to serve a jail term of two years or sometimes both. In case of cheque bounce, the bank allows the defaulter a chance to resubmit the cheque within three months of the date mentioned on it. If he fails to do so, a criminal complaint can be filed against him.

If the offender is an individual, he can be booked under Section 138 of NI Act while a company’s managing director can be personally prosecuted under Section 141.