What Should You Do If A Cheque Bounces?


With the arrival of the digital payment system, life has become easier for most of us. Banking transactions are simpler and faster. Yet, for many people cheque have continued to be a preferred mode of financial transactions.

For centuries, cheques have been considered a safe mode of transferring funds and making purchases. However, with the use of cheques, comes the risk of a ‘bounce’ or ‘dishonor’. The risk involves fines, penalties, and even imprisonment.

What is a dishonored or bounced cheque?

A cheque is usually a written promise made by the payer to the payee against a sum of money. The payee, also known as the drawee, deposits this cheque into the bank. In a perfect situation, the payer’s bank transfers the funds from the payer’s account to the payee.

But, there are times when the payer’s bank or the payee’s bank refuses to honor this promise. The reasons for this ‘decline’ may differ. In that case, the cheque bounces and is called a ‘dishonored cheque’.

cheque image

What are the consequences of a dishonored cheque?

A dishonored cheque appeals a penalty on the issuer of the cheque. It rests on the reason for the bounce.

If a cheque is dishonored as funds in the payer’s account were insufficient, it is a criminal offense under the Negotiable Instruments Act of 1881. The payer may be accused of issuing a cheque against an account with insufficient funds. The payee may choose to sue the payer or allow the payer to re-issue a cheque within three months. The payer may end up in jail for up to two years for issuing a dishonored cheque.

Apart from this, banks also charge penalties for the dishonor of cheques. The penalty differs from bank to bank. Banks may have different penalty portions for the amounts for which a dishonored cheque is issued.

If a cheque is bounced stating insufficient funds in a bank account, it is a criminal offense and the payee or the bank – can file a complaint under Section 138 of the Negotiable Instruments Act.

when a cheque bounces for the first time, the bank instantly issues a ‘Cheque Return Memo’ stating the reason for non-payment.

The holder is given the possibility to resubmit the cheque to the bank within a period of 3 months of the date mentioned on it.

The distressed party can also legally sue the nonpayer by sending a legal notice within 30 days of receiving the cheque return memo. This contains the nature of the transaction, amount, date of depositing the cheque, and when it was dishonored by the bank. If the cheque issuer fails to make a fresh payment within a month of receiving the notice, the holder has the right to file a criminal complaint against him.

However, if the distressed party fails to file the complaint within 30 days, the court will not entertain the suit unless the delay is justified with a valid reason. If the issuer is found guilty as a wilful defaulter, he will be charged with a jail term of 2 years or a fine which is twice the cheque amount, or both. The defaulter is also given a chance to appeal to the sessions court within a month of the date of the judgment of the lower court.


A cheque can be dishonored for lots of reasons. which are as follows:-

  • There is not sufficient balance in the account of the issuer as a result it is not processed by the bank.
  • The signature on the cheque did not match exactly
  • Disfigured and damaged cheques
  • Mismatch of Account numbers
  • Mismatch of signature or overwriting

Go digital

Instead of issuing a cheque, choose to transfer funds online.

An efficient way of avoiding cheque dishonor charges is to bank digitally.

Use NetBanking or Mobile Banking to transfer funds to third-party accounts. You can also make transfers within your accounts using the digital payment system

If you have to issue a cheque, a few things to keep in mind

1. Make sure you issue an account payee cheque.

2. Use the signature that is registered with the bank.

3. Ensure that there is a sufficient balance in your account.

4. Fill in details on the cheque carefully


A cheque bounce is also a common financial offense that can land the issuer into legal trouble. In India, the number of pending court cases relating to cheque bounce offenses is massive.
So try to avoid this situation, It is wise to keep track of the available balance and maintain extra cash in your account. In case, you find out there is insufficient money in your account, you can inform the payee in writing and issue a stop payment or cancellation at your bank before the date of the cheque

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