Cheque Bounce: Impact on CIBIL Score, Penalties & Legal Action
Amongst the many factors which impacts your CIBIL score is a cheque bounce. Even if you are financially very alert and always pay attention to your bank balance sometimes it might happen that you fail to check your bank balance and later when you deposit the cheque with your lender for making your credit card payment or loan EMI, you get a notification from the lender that your cheque has bounced. And this can create negative impact as your financial record comes into question. In banking industry, a bounced cheque is called as dishonoured or bad cheque.
So let’s understand what happens when cheque bounce.
Penalty on Bounced Cheque
There can be many reasons for cheque bounce such as insufficient funds in your bank account, details mismatch (for e.g. the signature does not match to the one in your bank record). In such scenario, you might be categorized as a defaulter. And in return, bank puts penalty along with a late payment fee which is nearly Rs. 200 to Rs. 700. In addition to this, banks also charge outward return penalty of nearly Rs. 300 and a cheque inward return penalty of Rs. 100. These two charges vary for each bank and the account type held. Normally charges are very high on premium accounts.
Impact on CIBIL Score
Even a single bounced cheque can affect your CIBIL score. And this might create problem in the future when applying for a loan or credit card irrespective of the lenders you apply to. This is because every lender first checks for the applicant’s CIBIL score in order to judge whether the person is credit worthy or not. Therefore always pay a special attention and never not let your cheque bounce/make late payment. Of course if everything is correct at your end the issue is at the lender’s end, you can always justify the same to the lender and the same will be resolved amicably.
If you have made a payment via cheque to any company, banking institution or others but it bounce, then in such case these companies can take criminal action against you. However the company will first send you a cheque memo notice. And the payee will be given a 3 months time to make the payment. But if cheque bounce even after that, then be ready to get prosecuted legally. And if it is found that you are a frequent defaulter then get ready to go behind the bar along with your bank account getting ceased permanently.
In case of EMI cheque getting bounced, banks are authorized to auction the security but only after the defaulter had been issued a notice before auctioning. But as per RBI guidelines, if the value of cheque is over 1 crore and the default happen more than 4 times then only auctioning can be done. As per the guidelines of Reserve Bank of India, bank can also deduct money from your account on a pre-fixed date. If the bank balance is less, then you will also be charged additional fees.
Reasons cheque can bounce
There are many reasons to this and two most important ones we’ve already discussed above i.e. lack of sufficient funds in your account and a signature mismatch with bank’s database. Other reasons are:
- Incorrect date mentioned.
- Depositing the cheque prematurely even if it is post dated.
- Technical/system error such link or power failure.
So always stay alerted especially when making due payment on your credit card or loan because a poor CIBIL score can affect you financially in the future.