How long is late before a cheque is credited?

You drop a cheque with your banker for collection. How long will you wait before it is credited to your account? A week? 15 days? A month?  A customer had to wait for 10 years! 

The case of this customer, call him Mr Dixit, is recounted in the 2010-11 Annual Report of the Banking Ombudsman released recently. Mr Dixit deposited the cheque he received for retirement benefits in 2000.

Since the amount never got credited to his account, he approached the bank. However, the bank repeatedly denied having received the cheque.

With no positive response from his bank for a long time, Mr Dixit finally managed to obtain a photocopy of the paid cheque from the issuing bank. From the photocopy, it was clear that the paying or issuing bank was not at fault.

RBI rules

The cheque had been duly debited to the issuer's account and the bank that received the proceeds was where Mr Dixit had an account. After 10 long years of agony, the sum was credited to his account in January. Ten years is unjustifiable under any circumstances, but is there a time limit at all for collection or credit that binds the banks?

In this regard, the Reserve Bank of India mandates banks to comply with a ruling (September 2008) given by the National Consumer Disputes Redressal Commission. According to the commission, for local cheques, credit and debit should be given on the same day or at the most, the next day of their presentation in clearing. For outstation cheques, the maximum time for collection of cheques drawn on State capitals, major cities and other locations is 7, 10 and 14 days respectively. But more importantly, if there is a delay, banks are mandated to pay interest at a rate formulated according to their policy. If nothing is specified, the applicable rate shall be the interest rate on fixed deposits for the corresponding maturity. It is obligatory for banks to display their cheque-collection policy on the notice board at their branches as well. In Mr Dixit's case, not only did the bank cause a 10-year delay but it did not also pay any interest despite representation. He approached the ombudsman.

Know your rights

Considering the gross deficiency of service and the lack of any serious efforts by the bank to trace the proceeds of the cheque, the bank was directed to pay interest at the applicable fixed deposit rate plus 2 per cent till July 31, 2007.

From August 2007 to January 2010, the bank was directed to pay interest according to its compensation policy, which came into effect in August 2007. The bank was asked to pay a compensation of Rs 10,000 in addition. So, if you are faced with a similar problem, be on the vigil. If you know your rights, the bank cannot take you for a ride.

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