What changed
Previously, banks paid cheques and similar instruments presented within six months of issue. RBI, acting under Section 35A of the Banking Regulation Act, 1949, has reduced this period to three months for instruments dated on or after April 1, 2012. The change aims to curb misuse where instruments were circulated like cash for six months.
What it means for you
Banks must update their cheque processing systems and internal policies to reject instruments presented after three months from the date of issue. This reduces the window for fraud and misuse, but also requires clear communication to customers through printed or stamped instructions on new cheque leaves and instruments. Non-compliance could lead to regulatory action.
What you must do
- Update cheque processing systems to reject instruments presented after three months from the date of issue for those dated on or after April 1, 2012.
- Print or stamp a clear instruction on all cheque leaves, drafts, pay orders, and banker's cheques issued on or after April 1, 2012, stating the three-month presentment period.
- Notify account holders and instrument holders about the change through branch notices, account statements, and digital channels.
- Train branch staff and clearing teams on the new validity period to ensure consistent implementation.
Who it affects
All scheduled commercial banks (excluding RRBs), Local area banks, Customers issuing or receiving cheques, drafts, pay orders, and banker's cheques, Clearing and payment processing departments
Does this apply to instruments issued before April 1, 2012?
No, the three-month validity applies only to instruments dated on or after April 1, 2012. Instruments issued earlier continue to follow the six-month rule.
What happens if a cheque is presented after three months?
Banks must not make payment on such instruments. They should be returned unpaid with the reason 'out of date' or similar, as per the new directive.
Are regional rural banks (RRBs) covered by this directive?
No, the circular explicitly excludes RRBs. They are not required to follow this change unless separately directed.