RBI Guidelines on Dishonour of electronic funds transfer for insufficiency of funds in the bank account

Reserve Bank of India vide its circular no. DOC/2011-12/191 DPSS. O.PD.No.497/02.12.004/2011-12 issued on 21 September 2011 have highlighted that section 25 of the Payment and Settlement Systems Act, 2007 accords the same rights and remedies to the payee (beneficiary) against dishonour of electronic funds transfer instructions for insufficiency of funds in the account of the payer (remitter), as are available to the payee under section 138 of the Negotiable Instruments Act, 1881.

The sub-section (5) of the section 25 of the Payment and Settlement Systems Act, 2007 provides for punishment of two years and twice the amount of electronic funds transfer instruction, or both for dishonour of such electronic funds transfer on par with the penalties stipulated for dishonour of cheques under the Negotiable Instruments Act, 1881.

This information is published to boost the confidence of customers in electronic payments by allaying any apprehensions on the rights and remedies available to payees against dishonour of electronic funds transfer instructions.