What changed
This circular reinforces existing prohibitions from November 2011 on crediting account payee cheques to third parties. It adds no new rules but reminds banks of the strict requirement and the Rs.50,000 threshold exception for cooperative credit societies.
What it means for you
Banks must tighten cheque collection processes to prevent misuse of account payee instruments. The Rs.50,000 cap for cooperative credit societies offers limited operational flexibility but requires careful verification to avoid regulatory breaches.
What you must do
- Update internal policies to explicitly prohibit crediting account payee cheques to third-party accounts.
- Train staff on the Rs.50,000 exception for cooperative credit societies and ensure proper payee verification.
- Conduct audits of cheque collection practices to identify and rectify any non-compliance.
- Communicate the prohibition to all branches and ensure system-level controls are in place.
Who it affects
Regional Rural Banks (RRBs), State Cooperative Banks (StCBs), Central Cooperative Banks (CCBs), Cooperative credit societies and their customers
Can we credit an account payee cheque to a third party if the payee authorizes it?
No. The circular strictly prohibits crediting account payee cheques to anyone other than the named payee, regardless of authorization. Only the exception for cooperative credit societies up to Rs.50,000 applies.
What verification is needed for the Rs.50,000 exception for cooperative credit societies?
Banks must confirm that the payee named on the cheque is a constituent of the cooperative credit society and that the cheque amount does not exceed Rs.50,000. Proper documentation and audit trails are essential.