What changed
RBI issued a reminder to RRBs about the existing prohibition on crediting account payee cheques to third-party accounts, citing non-adherence concerns. The circular reaffirms the earlier instructions from April 2006 and the relaxation for cooperative credit societies from October 2010. It also clarifies that the same rules apply to drafts, pay orders, and bankers' cheques.
What it means for you
RRBs must tighten internal controls to ensure account payee instruments are not misrouted to unintended accounts, reducing fraud risk. The continued relaxation for cooperative credit societies up to Rs 50,000 provides a limited exception, but RRBs must enforce strict compliance to avoid regulatory action. This reinforces the importance of KYC and payee verification in cheque collection processes.
What you must do
- Reinforce staff training on the prohibition of crediting account payee cheques to third-party accounts.
- Update internal audit checklists to verify compliance with this circular and the 2006 instructions.
- Ensure the Rs 50,000 relaxation for cooperative credit societies is applied only with proper documentation as per the October 2010 circular.
- Extend the same prohibition and relaxation to drafts, pay orders, and bankers' cheques in your operational procedures.
- Acknowledge receipt of this circular to your respective RBI Regional Office.
Who it affects
All Regional Rural Banks (RRBs), Cooperative credit societies (beneficiaries of the relaxation), RRB customers who issue or receive account payee cheques
Can an RRB credit an account payee cheque to a third party's account?
No, RRBs are strictly prohibited from crediting account payee cheques to anyone other than the payee named on the instrument, as per RBI instructions since 2006.
Is there any exception to this rule for cooperative credit societies?
Yes, RRBs may collect account payee cheques up to Rs 50,000 for cooperative credit societies if the payee is a constituent of that society, subject to conditions in the October 2010 circular.
Do these rules apply to instruments other than cheques?
Yes, the prohibition and relaxation also extend to drafts, pay orders, and bankers' cheques.