No overwriting on cheques after 1st Dec: RBI

The RBI directive to banks, asking them not to honour cheques with overwriting, will come into effect from 1st December instead of the earlier scheduled date of 1st July.

The new rule is intended to prevent fraudulent withdrawal of money and expedite clearance of cheques, the apex bank said in its latest circular.

RBI has advised banks to create awareness among customers about the new norms, which were aimed at preventing fraud, besides expediting clearance of cheques where CTS (Cheque Truncation System) is used.

Under CTS, image of cheque is sent to clearing house for transfer of funds.

When contacted, an RBI spokesperson said, "The notification regarding cheque truncation system which prohibits alteration will come into effect from 1st December, 2010. There is no mention of 1st July."

The central bank in February had come out with circular on 'Standardisation and enhancement of security features in cheque forms' detailing the norms for image-based processing of cheques.

RBI had said that fresh cheques should be issued by customers in case of change in payee's name or amount (whether in figures or words).

Changes, however, could be made with regard to date.

The new norms will not apply to those cheques, which are cleared by clearing houses that use Magnetic Ink Character Recognition (MICR) or non-MICR system.

Also, it added, the norms will not be mandatory for over the counter collection of funds or for direct collection of cheques outside the Clearance House Arrangement.