Cheque  – why good for payment?

Raghunath Pradhan

A cheque is an instrument for making payment. It is, no doubt, the easiest way of making payment and also helps the country for monetizing the economy.  It is an order given by an account holder to its bank for making payment of specified amount to a designated person or its holder. Before issuing a cheque, drawer needs to ensure sufficient balance in the account is maintained for honouring the issued cheque. Once the cheque is issued, it will be the liability of the drawer for ensuring its payment. In case, the bank dishonored the cheque, it will be ultimate responsibility of the drawer for making payment of such cheque either injecting the deficit amount on his account or signing again on the cheque if it was rejected on the ground that signature mismatched with the bank’s record.

Some fraudster use to draw cheque with bad intention without making sure sufficient balance for honouring the cheque. So even today, people hesitate to accept cheque payment with the fear of dishnouring the cheque beside other reason as well. Cheque payment is recorded and there is some other regulatory provision as well on receiving the payment of the cheque. Cheque only of rupees less than 10 lac is payable in cash and of rupees 10 or above is payable only through account. In other words, it will be automatically account payee. But in case of cheque drawn in favour of artificial person, i.e. firm, company, it will be Account Payee irrespective of its amount.

To increase the faith on the cheque, punitive aspect has also been defined. There is regulatory provision of black listing to the drawer of the cheque for being disabled for making arrangement to honour the cheque. As per the regulatory provision, the holder of the cheque may represent the dishnoured cheque providing two working days time. In case of nonpayment of the cheque even after provided time of two working days, the holder of the cheque may request the bank for blacklisting the drawer of the cheque within the six months from the date of issue.

Upon the receipt of such request, the bank will serve notice to the drawer of the cheque providing time of seven working days. In case the cheque could not be honoured even after provided time period, the bank needs to request Credit Information Bureau (CIB)  for blacklisting the drawer of the cheque mandatorily.

The blacklisted person, as per the provision, cannot open the account and is not allowed to do any banking transaction except depositing the money on the account.

Above blacklisting provision badly hit the businessman because the person cannot raise any loan amount and is allowed to carry only deposit transactions. But to the holder of the cheque, it is very uncertain to receive the payment of the cheque even after blacklisting. The holder of the cheque may also required to take legal action against the drawer of the cheque which is also time consuming process and will be cumbersome to receive the payment of the cheque creating the situation of uncertainty.

As a matter of fact, people use to receive payment through good for payment cheque, specially when the payment is to receive from  unknown person and of high value. 

Good for Payment marked cheque is a cheque endorsed by the bank with guarantee on the payment of the cheque. The bank will be liable for making payment of the Good for Payment marked cheque. So, before marking good for payment, bank will ensure whether the cheque is payable on its presentation verifying the amount available on the account, date of the cheque, amount in words and number, signature/s etc and then after the required amount for honouring the cheque shall be hold.

Citing the fraudulent activity happened in the past, the regulator has now made restriction on providing loan against Good for Payment marked cheque. And to make liable to the issuance of such cheque it is also required to provide the signatures of two officials with name, code number and designation  and the stamp of the bank or financial institution (BFI) on issued good for payment cheques

Minister for Industry, Commerce and Supplies Dilendra Prasad Badu said that it was necessary to increase the capacity of the existing industries. This was stated by Minister Badu while responding to a question raised by the lawmakers under the Appropriation Bill, 2079 in the National Assembly on Sunday. Minister Badu said that some industries could not run at their full capacity and if all the industries could be run at full capacity, employment opportunities would be created within the country. He also claimed that the current budget has tried to take the country’s economy towards self-reliance.

Minister Badu said that only 60 to 70 percent of the existing industries could be run, adding that the government was taking steps to make it fully operational. He said that some industries could not run at their full capacity and if all the industries could be run at full capacity, employment opportunities would be created within the country. “In order to create a conducive framework for the operation of ailing industries, whether the government itself or the government and the private sector can run the PPP model or even on a long lease, the private sector can also run it. “If all the closed industries can be run, there will be employment opportunities,” he said. The government has that policy. We are moving towards increasing employment and productivity more than today.

(The author is a former banker having the experience of nearly four decades).