Despite the advent of e-banking and now mobile banking, cheques still play a very important role in the banking system. They cater to the masses, including those who are not very comfortable with paperless banking. Writing or drawing a cheque is a very simple exercise. But still, you have to follow some basic steps to ensure some writing errors don't cost you your hard-earned money.

THE CHEQUE WITH ALTERATIONS

While RBI had released a circular to banks to dishonour cheques with alterations even if the same is authenticated, the implementation of the same has been deferred till December 1, 2010, and shall be applicable only in New Delhi as it is a CTS (Cheque Truncation System) enabled location. Therefore, in the current scenario, if the customer has issued a cheque wherein the alterations have been authenticated, the same shall be honoured by the bank. But bankers advise that alterations should be avoided in a cheque for their own interest. "It is advisable to avoid alteration in cheque. But if there is some minor alteration, then it should be authenticated by the drawer by signing over it. Major alteration where a material content is being changed can be authenticated, but it is advisable to issue a fresh cheque in lieu of such a modified cheque. This will safeguard customer from any probable misuse of cheque," says Bhavesh Zaveri, country head, wholesale banking operations & cash management product, HDFC Bank.

HOW MANY MISTAKES CAN YOU AFFORD?

As such, law doesn't specify or restrict the drawer on this, but as stated above, it is advisable to avoid alterations in cheque - this is in the interest of the customer only. Error and counter signature should be authorised with full signature of the customer before honouring the cheque. "Though the number of errors accepted varies from bank to bank, it is advisable to issue a fresh cheque if the payee name/amount is changed," says an ICICI Bank spokesperson.

WHAT'S IN A SIGN?

Cheque may be dishonoured for various reasons like insufficient funds, signature mismatch and the like. Cheque return charges are levied in customer account only when the same is getting rejected for non-availability of funds in the account. For technical reasons like signature mismatch, payee name difference, alteration not authenticated, etc no charges are levied in the customer account. If the customer signature on the cheque does not tally with the signatures in bank records, it amounts to signature mismatch. The bank records the customer signature electronically at the time of start of the relationship.

"If the customer is regularly facing the problem of signature mismatch, the customer has to give an application to the bank for change in signatures, preferably with a proof of new signature. Also, the customer will be expected to visit the branch in person and sign in the presence of the branch manager," says Puneet Kapoor, Head, Retail Liabilities & Branch Banking, Kotak Mahindra Bank.

A TALE OF TWO CITIES

There are different aspects of processing a cheque involved here and the customer should be aware of these aspects to get speedy collection in his account. Payable at Par cheques can be presented at any location since such cheques are payable throughout India and most of the banks have CBS (Core Banking Solutions) to serve the customer in this regard. For other ordinary cheques, there is a system called "Speed Clearing". Cheques can be speedily processed through Speed Clearing provided the location of collecting bank and the location of drawee bank participate in Speed Clearing. "Depending on the characteristic of the cheque, it would get realised between 1 day to 14 days. i.e. if it's a PAP (Payable At Par) cheque or the city where the same is being deposited is a Speed Clearing location, the cheque would get realised in local clearing within 1-2 days," Mr Kapoor adds.

Source: The Economic Times