Understanding Positive Pay System (PPS) for Cheque Clearance Above Rs 5 Lakh

The Positive Pay System (PPS) is an essential tool for the clearance of cheques with a value above Rs 5 lakh. It serves as a critical measure to prevent fraudulent activities, such as cheque tampering and cheque fraud. This article will explain what PPS is, its importance, and the steps involved in implementing it.

Introduction to Positive Pay System (PPS)

Positive Pay System was first introduced by the Reserve Bank of India (RBI) in September 2020 for cheques issued for amounts above Rs 50,000. However, it was initially not mandatory. Recently, RBI has issued new guidelines, making PPS mandatory for clearing cheques of value above Rs 5 lakhs as of July 2023.

What is Positive Pay System (PPS)?

A Positive Pay System is a mechanism that involves reconfirmation of some critical details by the bank when a cheque is presented for clearing. For cheques issued for a value of Rs 5 lakhs or above, the person issuing the cheque needs to provide the bank with the following details:

Additionally, an image of the cheque issued must also be shared with the bank. This can be done through various methods such as in person, mobile banking, or internet banking.

How Does Positive Pay System Work?

When the cheque is presented for payment, the bank cross-verifies the details provided by the drawer and matches them with the image of the cheque. If all the details and the image match, the cheque is honored.

Benefits of Positive Pay System (PPS)

The Positive Pay System helps in preventing various fraudulent activities associated with cheques, including:

Implementation and Challenges

While PPS is a beneficial measure, its implementation can vary from bank to bank. For instance, the Bank of Baroda has its own specific requirements. According to the official information, if a cheque is issued from the Bank of Baroda, the Positive Pay form must be submitted at the branch where the account is held. Unfortunately, this is not a universal rule and can vary between banks, especially for public sector banks like BANK OF BARODA.

However, customers from other banks may have more flexibility in submitting the Positive Pay form from any branch. This inconsistency can lead to frustration and inconvenience for customers who might face difficulties in adhering to the required procedures.

Conclusion

In conclusion, the Positive Pay System (PPS) is a critical safeguard against cheque fraud, especially for cheques of high value. By following the prescribed procedures, businesses and individuals can ensure that their financial transactions are secure. While some banks, like the Bank of Baroda, have strict guidelines, it is vital for all banks to implement these measures uniformly. This will provide clarity and ease for customers and prevent unnecessary inconvenience.