Cheque Dishonour or Bouncing is a criminal offence in India. The Section 138, Negotiable Instruments Act, 1881, in regard to dishonor of cheque attracts criminal liability.
Impact of Cheque Dishonour:
First of all, bank will charge a penalty for your cheque dishonor. Also, your Credit Score will have a bad impact. As a result of which, you will have no access to any loan. Not only this, but, you may get into legal issue as well.
Bank Penalty :
Bank imposes penalty on you if your cheque gets dishonoured. And, penalty amount could be from Rs. 100 to Rs.700 and taxes. Also, this amount varies from bank to bank and one financial institution to another. Also, cheque dishonour charges are very high on premium accounts.
Affects CIBIL Score :
When you have given post dated cheques for the repayment of your loan EMI or for the payment of your credit card bills. And that cheques gets dishonoured. It will definitely hamper your CIBIL score. Because, non payment of your EMI gets updated in CIBIL report. So, beware !!!
If you have made a payment via cheque to any payee such as an individual, a company, against a service which you have availed or to any bank or financial institution which gets bounced. In such cases, payee can file criminal case against you under Section 138 of NI Act 1881 for this offence. And, your offence is punishable. As a result, following are the possible punishments:
Punishment for offence of Cheque Dishonour : Punishment prescribed for such an offence could be either:
- Monetary Fine, which may extend up to twice the amount of the cheque, or
- Imprisonment for a term which may be extended up to two years, or
- Both the above.
No access to any Loan :
If your cheque got dishonoured in past 6 months of your loan application date, your loan will be rejected. No questions asked and no excuses are acceptable. And, as a result of which you may face a trouble in securing any crucial loan in future such as Home Loan, Education Loan, Business Loan, etc.
Reasons cheque can bounce
Your cheque may get dishonored because of either of the following or multiple of them:
- Insufficient funds in your account
- Signature mismatch with bank’s database
- Incorrect date on the cheque
- Depositing the cheque prematurely even if it is post dated.
- Technical/system error such link or power failure.
So, before you write a cheque, especially relevant, when you are paying bill of your credit card or loan EMI, make sure that your account is fully funded. Also, date is correct & in proper format. And, sign the cheque exactly the same way as you have your signatures with your bank.