RBI’s Positive Pay

BE/RBINOTE/54/2020

Here is the new system advised by RBI to the Banks to be implemented in order to reduce cheques related frauds. The System termed as Positive Pay is to come into force from January 2021.

The system acts against cheques frauds where the cheques leaf and signatures are genuine but a fraudster alters the cheques details. This was revealed by Mr. Bharat Panchal, Chief Risk Officer, India, Middle East and Africa, FIS, a Technology company that focuses on Financial services sector.

The system adds an extra layer of security and it is optional for banks to implement the system mandatorily or leave it to the customer’s discretion. Also, banks can make it mandatory in case of cheques for amounts of Rs. 5 lac and above as per RBI notification. The Positive Pay facility is being developed by the National Payments Corporation of India (NPCI).

How does it work?

• Customers simply have to share the details of the cheques they issue with the bank.
• Before making payment against the cheques, banks will match the details on the cheques with those provided by the customer.
• The issuer of the cheques, RBI adds will submit the details electronically, through channels like SMS, Mobile app, Internet Banking, ATM and so on.
• Customers will enter the details such as name of the person or organization to whom the cheques is issued, the amount, the cheques number and date of its issue.
• Once the customer shares these details, banks’ system will upload the data into a centralized data system.
• On receiving the cheques the bank will verify the details from the central database. Here the system allows banks to authenticate the cheques twice – once by matching the signature of the issuer and then by cross-checking the details.
• Cheques already have security features like Watermark, Logo, Pantographic Image, Serial Number, Account and Features which are not visible under normal light
• It Prevents frauds.
• It works as an insurance for customers.
• If an account holder shares the details of the issued cheque and if the bank still clears a fraudulent cheque, the onus is on the bank and not on the customer.
• Here the onus or responsibility is thus clearly defined either on the part of the customer of the bank.

Banks normally do not take responsibility if the signature and cheque leaf are genuine when a fraud happens wherein, any alteration in such cases is normally attributed to the account holder’s negligence.

Its advantages:

1. It Prevents frauds.
2. It works as an insurance for customers.
3. If an account holder shares the details of the issued cheque and if the bank still clears a fraudulent cheque, the onus is on the bank and not on the customer.
4. Here the onus or responsibility is thus clearly defined either on the part of the customer of the bank.
5. Banks who normally do not take responsibility if the signature and cheque leaf are genuine when a fraud happens. Any alteration in such cases is normally attributed to the account holder’s negligence.

Hence account holders must make it a point to opt for the Positive Pay System and make it mandatory, to avoid falling a victim to banking fraud.