written by | May 11, 2022

Know About Cheque Bounce Penalty Charges

Cheque bounce is a contravention of Section 138 of the Negotiable Instruments Act of 1881, which carries a penalty of up to double the cheque's value, a two-year prison sentence or both. Whenever the client shows the cheque in the bank for claims, the bank rejects it unpaid with a message indicating financial difficulties. Thus it is referred to as a bounced cheque.

A cheque bounce may happen for various reasons, but it is an offence of the Act if the cheque bounces because of inadequate money in the drawer's account. The bank must deny the reimbursement cheque and issue a return memorandum letter of explanation for the refusal as insufficient income. In this instance, the payee may send a cheque bounce notification to the cheque's drawer, requesting payment of the cheque amount.

Did you know?

Cheque bounce is one of India's most common financial offences that can lead to disastrous consequences for the issuer like penalty by the bank, negative impact on CIBIL score, filing of civil & criminal charges by the aggrieved party and other risks.

Also Read: Get Complete Information on Cheques in Detail

What Is a Cheque?

A cheque is a bill of exchange in which one party instructs the bank to transfer funds to another party's bank account. It's a negotiable instrument protected by the 1881 Negotiable Instruments Act. 

Cheque Bounce or Cheque Dishonoured

When the bank cannot process a cheque for various reasons, it is called a "cheque bounce." Before we look at the penalties most Indian banks levy, let's look at the most prevalent causes of cheque bounces and why you should never write a cheque lightly.

Cheque Bounce: What Causes It?

  • Inadequate Balance in Account

If the drawer's current balance cannot fund the cheque's pay, the bank must deny the cheque. The bank should transfer it to the payee along with a memorandum stating that the drawer's credit limit is insufficient to fulfil the payment of the cheque.

  • Expired Cheque Validity

The drawer must resubmit for payment following three months of writing the cheque, and it will be void if the drawer does not submit the cheque to the bank within three months. When a bank gets an expired cheque, it is returned to the sender.

  • Overlapping

If the drawer's signature, the cheque sum and any other indication have been altered, the cheque will void.

  • Distorted Cheque

A cheque can bounce if it has been ruined or distorted, the information is not viewable, and there are marks or staining on the cheque.

  • Contrasting Signature

The cheque may fail if the drawer's sign is not clear or nonexistent or when it does not resemble the bank's database.

  • Mismatch of Text and Numbers

The cheque will float if the being more on the cheque in text and numbers doesn't coincide.

Other reasons might be an issue with the cheque date, a discrepancy in the account number or amount, an expired cheque, or the drawer's account being locked. Some other issues can be payment being prevented. The company's seed is not available on the cheque, suspected cheque, in case of drawers death or insanity, scribbling on the cheque leaf, etc.

What Happens When a Cheque Is Bounced or Dishonoured?

Depending on the reason for the bounce, the issuer will be responsible for the penalty on the dishonoured cheque. The Negotiable Instruments Act of 1881 makes it a criminal offence to dishonour a cheque due to insufficient money. The payer must pay charges for issuing a cheque against an account with inadequate funds. The payee has three months to sue the payer or allow the payer to reissue a cheque. The payer might face up to two years in prison for issuing a dishonourable check. Banks will also charge penalty fees if a cheque is returned to you without being paid. The penalty varies depending on the bank. Banks may have different penalty categories for the amounts of the issued dishonoured cheque.

Punishment & Penalty Related to Dishonoured Cheques By Different Banks

Bank Name

Penalty Charges ( GST applicable)


  • Unpaid by others amount up to ₹1 lakh - ₹150, above ₹1 lakh - ₹250
  • For insufficient funds, only ₹500
  • For technical reasons - ₹150


  • Cheque Return Outward (financial reason) - ₹200 per instance
  • Cheque Return Inward -  ₹500 per instance
  • ₹50 for non-financial reasons leaving signature verification
  • Outstation Cheque - ₹150 plus other bank charges

Axis Bank

  • Outward Cheque Return - ₹200 cheque
  • Inward Cheque Return - ₹500 per instance
  • Inward Cheque Return (Non-financial) - ₹ 50 Flat per instance
  • Outstation Cheque Return - ₹150 per cheque

Bank of Baroda

  • Inward Return 

Up to ₹1 lakh - ₹125

Above ₹1 lakh to less than ₹1 Cr - ₹250

Above ₹1 Cr - ₹500

  • Outward Return (Financial Reason)

Up to ₹1 lakh - ₹250

Above ₹1 lakh to less than ₹1 Cr - ₹500

Above ₹1 Cr - ₹750 per instrument

  • For other Reasons - ₹250


₹550 GST

The New Cheque Bounce Rule

Customers whose financial operations rely significantly on cheques or who intend to use cheques would be required to maintain a minimum bank balance, according to an article published by the Reserve Bank of India (RBI) at the start of August 2021. The cheque will bounce if this minimum balance isn't kept. In addition, the client who provided the cheque may be charged a monetary penalty. In addition to these improvements, the RBI declared that the National Automated Clearing House (NACH) would be open 24 hours a day, seven days a week. 

Whether National or private, all the banks are affected by these changes. They implemented regular modifications to speed up and smooth out the clearance of cheques. Because the new law assures that NACH operates every week, Sundays will also be a workday when the institution proceeds to submit and clear a cheque.

Also Read: Cashing a Cheque: What to Do?

What Are the Legal Ramifications of a Cheque That Has Been Dishonoured in India?

If the payee decides to sue, the drawer has an immediate opportunity to pay the cash. Thirty days after the payee receives a cheque return memo from the bank to make that happen. The payee must send a notice to the drawer from the payment date, and the notice must state that they must pay the amount to the payee within 15 days of receiving the notification. If the drawer fails to pay the money to the payee within 30 days of receiving the notice, they have the full right to file a criminal complaint against the cheque issued under the Negotiable Instruments Act of 1881. However, the payee must complete the allegation or investigation within a month of the expiry notice period.

The Remedies for Cheque Bounce

Cheque Resubmission

When any cheque fails due to erasure, a signature inconsistency, a disparity in the numeral figures and the text of the paid amount, or a ruined cheque, the payee may request that the drawer reissue the cheque. Suppose the drawer refuses to offer up another cheque. In that case, the payee may pursue legal action/ criminal charges against the drawer to recover the money owing to him instead of the cheque bounce.

A Cheque Bounce Notice

The payee must give notice as Section 138 of the Negotiable Instruments Act.

When a cheque fails due to limited money in the drawers' fund to cover the cheque generous amounts, a cheque bounce notice is given under Section 138 of the Negotiable Instruments Act. If a cheque bounces for any cause other than a lack of funds, no one will issue a bounce notice, and the payee may request that the cheque be reprinted.

Cheque Bounce Notice Issuance

When a check bounces because of insufficient funds, the first stage is to file a claim for penalties under the Negotiable Instruments Act by mailing a cheque bounce notice. Under thirty days of receipt notification from the bank and the rejected cheque, the payee may file a cheque bounce notice saying that the bank cannot complete the payment of the cheque due to insufficient funds.

After obtaining a cheque bounce warning, the payee should give 15 days to the drawer after the date of receiving the cheque bounce notice to pay the amount of the cheque. If the drawer does not provide the cheque's payment amount after 15 days, the payee has the right to sue the drawer within 30 days of the 15 days ending.

On the other hand, we cannot send a cheque bounce letter if the cheque was written as any donation, grant or other legally binding obligation. As per the section, we must receive the check to eliminate a legally valid responsibility or debt as an offence.

After a Cheque Bounce Notice Is Issued, What Should You Do?

The payee could file a lawsuit against the drawer within fifteen days of receiving the cheque bounce notice. Under Section 138 of the Act, the payee is obligated to make a grievance. Cheque bounce is a crime that can be prosecuted by the payee under Section 138 of the Act. The payee can register/ file a complaint with the Magistrate about the cheque bounce within thirty days of the expiration date of notification release.


According to the Supreme Court of India, cheque bounce cases have increased dramatically, with up to 40 lakh instances standing before the courts. However, the reforms implemented in 2015 and 2018 came with a commitment to dispose of the cases quickly and ensure that the victims receive redress. The reforms have added transparency to the system by prohibiting people from defaulting on their payments. As a result, the Section 138 process has aided in facilitating commercial transactions because consumers now feel more secure. It has also assisted in keeping up with the modern banking system.
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Q: How many times can a cheque bounce?


Until the payee or recipient takes legal action, a cheque might bounce numerous times over its validity term.

Q: What is the new rule of cheque bounce?


If the payee is willing to take legal action for the cheque bounce, the cheque issuer can face imprisonment for up to 2 years or a penalty.

Q: What happens if a business cheque bounces?


Under Section 138, a business cheque bounce consequences are similar to the regular cheque bounces, including imprisonment of up to 2 years and a penalty.

Q: How much is the cheque bounce penalty charge?


Cheque bounce penalties range from ₹50 to ₹750, depending on the bank.

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