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Cheque Bounced? Here’s Why You Should be Concerned

May 04, 2018

Cheque Bounced? Here’s Why You Should be Concerned

Believe it or not, cheque bounce is one of the most common financial offenses in India. However, its actual damage is far more widespread than you may want to believe.
The following are some of the various ways a bounced cheque can hurt you:

  1. Heavy Penalty
    When a cheque is bounced because of lack of sufficient funds or incorrect signature, then the defaulter, as well as the payee, are penalized by their respective banks.
    If the cheque was meant for the repayment of a loan, then you can expect to pay late payment charges as well as other additional charges.
  2. CIBIL Score Damage
    Your CIBIL score is the score of your creditworthiness. It’s checked by the banks and NBFCs to learn about your personality and your attitude towards personal finance. It helps them to minimize their risks because they only approve loans and credit cards for those who have a high CIBIL score.
    When a cheque signed by you is bounced then it can hurt your CIBIL score too. This is because the bank may inform CIBIL about this incident and they can take action accordingly.
  3. Legal Troubles
    A bounced cheque can easily draw the ire of the party it was meant for. In fact, the Sec 417 and 420 of the Indian Penal Code (IPC) 1960, and Section 138 of Negotiable Instruments Act, 1881 allow them to file a case against you if they want. Although the first step of the process is the sending of a legal notice, if you are found guilty you can face a jail term up to 2 years along with a huge fine.

As you can clearly see now, a bounced cheque is something that should never be taken lightly. So, the next time you sign a cheque, make sure that you have sufficient funds in your account and the signature is correct.

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