Cheque Return/Bounce: What are the reasons for cheque return or bounce?

Cheque Return/Bounce: What are the reasons for cheque return or bounce?

First, let us understand what the cheque is? Cheque is an order in written format given for paying money from Bank Account. This service is provided by bankers to their customers having their accounts with the bank. The cheque is a document and looks as follows:

There are four most important fields in the cheque, they are:

·         Drawer               : Who writes the cheque

·         Drawee              : Bank to whom an order in  given for paying  money

·         Payee                 : A person to whom money is to be paid

·         Amount              : Amount to be paid.

Whole procedure for paying with a cheque is:

The cheque is to be written very clearly. Many a times if the Drawer fails to follow the terms and conditions of payment by cheque, the cheque may be dishonored or returned by the bank. Dishonor simply means that the Bank will not honor/ accept your cheque and the payment will not be transferred from the drawers Account to the Payee’s Account.

The reasons of dishonor / return of cheque are as follows:

Insufficient Funds:

The first and foremost reason for the dishonor of the cheque can be lack of sufficient fund in the bank account of the drawer. Proper care should be taken every time paying someone by way of cheque that you have enough balance in your account to meet the cheque amount.

Clerical Mistakes:

Many a time’s people may make clerical mistakes in writing a cheque which may result in dishonor of cheque by the banks. Clerical Mistakes can be as follows:

      -          Signature: The signature of the drawer should be perfect and must be same every time. Still they may commit some error by mistake which are as follows:

o   Signature Different from the one provided to the bank

o   Signature not done

o   Signature incomplete

o   Signature unreadable etc

      -          Other Mistakes/Frauds:

o   Payee name unreadable

o   Payee Account not found

o   Drawer Account not found

Other Mistakes:

      -          Expired Cheque: The cheque is valid for Three Months from its date. The date may have lapsed.

     -          Payment Stopped by the Drawer: Drawer may stop payment in case where he comes to know anything ambiguous.

      -          Payment stopped by any other authority: such as Government, Court etc.

      -          In case where the cheque amount is to be paid from the overdraft account, if the amount of cheque is more than the amount that can be withdrawn by the drawer, then also Bank dishonors the Cheque.

      -          When the Account is closed and after that the Payee deposits such cheque for clearance.

      -          When the Account of the drawer id blocked temporarily or permanently in case the documents required for maintaining the account is not submitted by the drawer.

      -          When the Drawer gives post dated cheque and the payee deposits it before the same.

      -          Many a times the cheque is bearing no date such cheque are also dishonored.

      -          Cheque may be dishonored when the Drawer is proved insolvent.

      -          When the drawer or any other person makes any changes in the details once filled in the cheque, such alteration requires to be signed again by the drawer. If the same is not complied with the cheque is returned.