What changed
RBI reinforced earlier advice by mandating that NBFCs must not accept any new post-dated or EMI cheques—whether old or CTS-2010 format—in areas where ECS/RECS debit is available. Existing PDCs in those locations must be replaced with ECS mandates by end-December 2013. In locations without ECS, only CTS-2010 standard cheques are permitted.
What it means for you
NBFCs must accelerate digitisation of loan repayments, reducing reliance on physical cheques. This cuts operational costs and delays from cheque clearing, especially as non-CTS cheques face longer clearing cycles from January 2014. The legal protection under the Payment and Settlement Systems Act for electronic mandates equals that of cheques, so no extra cheques are needed.
What you must do
- Identify all locations where ECS/RECS debit facility is available and stop accepting fresh PDCs or EMI cheques there immediately.
- Convert all existing PDCs/EMI cheques in those locations into ECS debit mandates by December 31, 2013.
- Ensure only CTS-2010 compliant cheques are obtained in locations without ECS/RECS facility.
- Update internal systems and customer communication to reflect the shift to electronic mandates.
- Train collection staff on the legal equivalence of ECS mandates under the Payment and Settlement Systems Act.
Who it affects
All NBFCs accepting post-dated or EMI cheques, Customers of NBFCs in ECS-enabled locations, Operations and collections teams at NBFCs, Compliance departments at NBFCs
What happens if we continue accepting PDCs in ECS-enabled locations after December 31, 2013?
RBI's directive is mandatory; non-compliance may invite regulatory action. The circular explicitly states no fresh PDCs should be accepted in such locations, and existing ones must be converted to ECS mandates by that date.
Are ECS mandates legally as strong as cheques for dishonour cases?
Yes. Section 25 of the Payment and Settlement Systems Act, 2007 provides the same rights and remedies for dishonour of electronic fund transfer instructions due to insufficient funds as Section 138 of the Negotiable Instruments Act, 1881 does for cheques.
Can we still take additional cheques along with ECS mandates for safety?
No. The circular explicitly states there is no need for NBFCs to take additional cheques from customers if they already have an ECS debit mandate. Doing so would violate the directive.