RRBs: No Crediting Account Payee Cheques to Third Parties

What changed

RBI observed that some banks were collecting third-party account payee cheques for cooperative credit societies, which is not allowed. The circular clarifies that while the prohibition remains, a structured arrangement is permitted: a member bank can collect such cheques from a sub-member, provided the sub-member gives a written undertaking that proceeds will be credited only to the payee's account upon realisation.

What it means for you

RRBs must tighten their cheque collection processes to ensure account payee cheques are never credited to third-party accounts, even for cooperative credit society customers. The new arrangement allows member banks to facilitate cheque clearing for sub-members, but only with a formal undertaking to protect the payee's interest. Non-compliance could invite regulatory action.

What banks were required to do at the time

• Review your bank's current practice of collecting account payee cheques from cooperative credit societies and ensure no third-party crediting occurs.
• If acting as a member bank for sub-members, obtain a clear written undertaking from each sub-member that proceeds will be credited only to the payee's account.
• Train branch staff on the prohibition and the new permissible arrangement to avoid inadvertent violations.
• Update internal policies and audit checklists to reflect this circular's requirements.

Who it affects

All Regional Rural Banks (RRBs), Cooperative credit societies that are constituents of RRBs, Member banks of clearing houses dealing with sub-members