Bouncing of Cheques

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Cheque is an important aspect of the financial system in different countries across the global. How does a cheque operate? To be specific, it is regarded as an important document which an individual, company or government can use to transact various amounts. Further, a cheque can be termed as a negotiable document to transport money in a physical form or to execute inter-account transfer. How can an issuer manage cheque transfer? It is important to know that the issuer of a cheque should maintain an account, either saving or current, with a particular bank for a hassle-free amount transfer. A cheque transaction is marked as one of the safest ways of steering business since it leaves an entry against the cheque respected by the bank which can be further tracked when necessary.

A bounced check occurs when the writer of the check has insufficient funds available to fulfil the payment amount on the check to the payee or differ of signatures.

When a check bounces, they are not honoured by the depositor’s bank, and may result in fees and banking restrictions.

Additional penalties for bouncing checks may include negative credit score marks, refusal of merchants from accepting your checks, and potentially legally trouble.

According to Section 138 of the Negotiable Instrument Act, 1881, the dishonour of cheque is a criminal offence and is punishable by imprisonment up to two years or with monetary penalty or with both.

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