Cheques' Life Span Cut Short

Pritam P Hans | Print Edition: December 2011

Cheque validity
If you often delay depositing your cheques for credit into your bank account, be warned. From 1 April 2012, cheques, drafts, pay orders and banker's cheques will be valid for only three months. Currently, these instruments are valid for six months from the date of issue.

The Reserve Bank of India (RBI) said that some people were taking undue advantage of the long validity period and circulating these instruments in the market like cash for six months.

"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," the RBI said in a statement.

The three-month validity will apply for all cheques and drafts dated 1 April 2012 or later. Banks will have to mention the three-month validity on cheques and drafts issued from the next financial year.

The central bank has asked banks to ensure that account payee cheques and drafts are only credited to accounts of the person named in the instrument. Banks have also been asked to issue demand drafts of Rs 20,000 and above without account-payee crossing. Demand drafts without any crossing were being used for transfer of money as an alternative to settlement through cash.

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