By : M.S.Yatnatti Editor and Video Journalist Bengaluru :Reportedly A bank is supposed to keep your money safe. Yet there are any numbers of instances of fraudulent withdrawal of money from bank accounts. While in some cases, such fraud takes place with the connivance of the bank staff, in others, the negligence of the bank staff results in clearance of forged cheques.Whatever may be the cause, the law is clear -- the bank has to take responsibility for its action in clearing a forged cheque and refund the amount illegally withdrawn from the customer's account. Yet, the response of the bank to such complaints is never positive. The banks refuse to accept that a fraud has taken place. And then they try to escape liability by pointing to "contributory negligence" on the part of the customer. Here are a few decided cases of the National Consumer Disputes Redressal Commission and the Supreme Court that clearly show the way to victims of such fraud. In the case of N Venkanna VS Andhra Bank (RP No 1990 of 1999), for example, the National Commission made it clear that banks cannot escape liability by making out a case of contributory negligence on the part of the customer. It also pointed out that banks had a duty to meticulously cross check the signature on a cheque or a withdrawal slip and failure to do so constituted negligence. Similarly, in the case of Uma Shankar Bhatt VS Punjab and Sind Bank (OP no 98 of 2002) , the National Commission held that those who worked in banks ought to have a reasonable degree of intelligence and skill required of a person in that post. Failure to exhibit that skill (and recognize a forgery) constituted negligence and banks had to pay for its consequences.Similarly, in the case of Canara Bank Vs Canara Sales Corporation & others (1987) 2 SCC 666, (para 24) the Supreme Court held that "When a cheque which is presented for encashment contains a forged signature the bank has no authority to make payment against such a cheque. The bank would be acting against law in debiting the customer with the amounts covered by such cheques."The banking regulator's instructions to banks can also come to the rescue of consumers in such cases. In its Master Circular on Customer Service in Banks, compiled and put out on July 1, 2010 on its website, the RBI says that "if the branch is convinced that an irregularity/fraud has been committed by its staff towards any constituent, branch should at once acknowledge its liability and pay the just claim. (ii) in cases where banks are at fault, the banks should compensate customers without demur, and (iii) in cases where neither the bank is at fault nor the customer is at fault but the fault lies elsewhere in the system, then also the banks should compensate the customers (upto a limit) as part of a Board approved customer relations policy". You can also go to the consumer court, but this is a quicker process. You can file your complaint online at bankingombudsman.rbi.org.in.
The clearing system : Cheques are paper items which are physically transferred between banks at the same time as the electronic data is processed. Although the paying bank receives some of the data electronically, the physical cheques themselves must also be transferred so that they can be examined by the paying bank for security and fraud prevention purposes. Day 1:When a cheque is paid into an account (at the collecting bank) it is sent to the bank's clearing centre at the end of the working day. Day 2:All cheques received are sorted at the clearing centre and the sort code, account number and serial number on the bottom of the cheque, together with the amount of the cheque, are sent electronically to the banks on which they are drawn (the paying bank) by 11am. The physical cheque is then sent to the bank on which it is drawn.Day 3:The paying bank debits the payer's bank account with the amount of the cheque on the morning of day 3. At the same time, all banks calculate the amount they must pay each other on the basis of the value of all the cheques exchanged on the previous day. The net balances are then settled across accounts held at the RBI .This is the end of the central clearing cycle. However, if the paying bank was unable to pay the cheque, for instance if the cheque owner has insufficient funds in their account, placed a stop on the cheque, or filled it out incorrectly, it would return the cheque to the original collecting bank on day 3, or in certain specific circumstances, by 12 noon on day 4. Cheques are generally returned by first class post, so the earliest the collecting bank will know that the cheque will not be paid is day 4, or possibly day 5. When you deposit a check and it "clears,” that's a good thing - but what does that really mean? Can a check bounce or be cancelled after it clears? Processing checks is a confusing process, and scammers take advantage of that confusion. The results can be a costly lesson in the risks of accepting checks.It's essential to know that a check can bounce after you deposit it - even if your bank allows you to withdraw cash from that deposit. The process of clearing checks involves moving money from the check writer's account to your account. To do this, you deposit the check, your bank asks the check writer's bank for money, that bank takes money from the check writer's account, and they send it over.Once this process is complete, it is generally (but not always) safe to spend the money.
Did it Really Clear? Unfortunately, the term "clear” sometimes gets used prematurely. An item has really only cleared after your bank has received funds from the check writer's bank. But bank employees might tell you that a check has cleared, and your bank's computer systems might show that you have those funds available for withdrawal.Mixed terminology: in many cases, when somebody tells you an item cleared, they're saying that you can use the money. You can spend that money with your debit card, you can withdraw cash at an ATM, or you can set up a payment through online bill pay.Most of the time, this informal terminology is fine - If the check doesn't bounce, and you can spend freely.Funds available: most of the confusion around checks comes from bank policies andlaws that allow you to spend money before a check really clears. But that just means you can use the money - it doesn't mean the check has cleared (or that the funds have arrived from the check writer's bank).What if you Spend the Money?If you deposit a check, withdraw or spend the money, and the check bounces, you've got problems. The bank will reverse the deposit to your account. If you have money in the account, your account balance will drop - if not, you'll have a negative account balance and you'll start bouncing other payments and racking up fees.Ultimately, you are responsible for deposits you make to your account, and you're the one at risk. You are protected from certain types of errors and fraud, but that protection does not cover bad checks that you deposit..There are a few ways to avoid getting ripped-off (or having to pay for somebody else's honest mistake). First, the longer you wait to spend the money, the better your chances.
Reportedly In India, the clearing system is local and confined to a defined jurisdiction covering all the banks and branches situated in the area under a particular zone. The clearing house is a voluntary association of banks under the management of a bank where the settlement accounts are maintained. Wherever Reserve Bank of India has its office (and a banking department), the clearing house is managed by it. In the absence of an office of the Reserve Bank, the clearing house is managed by the State Bank of India, its associate banks and in a few cases by public sector banks..Keeping in view the technological progress in payment and settlement systems and the qualitative changes in operational systems and processes that have been undertaken by a number of Banks, the Reserve Bank of India had, with effect from 1st November 2004, withdrawn its earlier instructions to commercial Banks on (i) Immediate Credit of local/outstation cheques, (ii) Time Frame for Collection of Local / Outstation Instruments and (iii) Interest Payment for Delayed Collection. The withdrawal of these mandatory guidelines was expected to enable market forces of competition to come into play to improve efficiencies in collection of cheques and other instruments. This collection policy of the Bank is a reflection of our on-going efforts to provide better service to our customers and set higher standards for performance. The policy is based on principles of transparency and fairness in the treatment of customers. The Bank is committed to increased use of technology to provide quick collection services to its customers. .In India there are about 1050 cheques clearing houses. These clearing houses clear and settle transactions relating to various types of paper based instruments like cheques, drafts, payment orders, interest / dividend warrants, etc. In 40 of these clearing houses, cheque processing centers (CPCs) using MICR (Magnetic Ink Character Recognition) technology have been set up. At 14 more clearing houses, MICR cheque processing systems are proposed to be set up. The Reserve Bank has issued the Uniform Regulations and Rules for Bankers' Clearing Houses (URRBCH) which have been adopted by all the clearing houses. These regulations and rules relate to the criteria for membership / sub-membership, withdrawal / removal / suspension from membership and the procedures for conducting of clearing as well as settlement of claims between members.