Wednesday, June 17, 2009

BOUNCING OF CHEQUE - IMPLICATIONS

According to the data available with Chief Metropolitan Magistrate, the incident of bouncing a cheque has seen an increase of 129% in Mumbai alone. One of the chief reasons cited for this increase is the current economic downturn and increasing job losses. But, irrespective of the reasons , bouncing a cheque is deemed as a criminal activity and can have serious repercussions on the guilty party. Lets understand the full impact that bouncing a cheque can have on the person guilty of it.

1. Is a legal offence and can get you in jail - Dishonouring a cheque is a criminal offense under Negotiable Instruments Act , punishable by imprisonment of upto 6 months. The affected party can drag you to the court in case you bounce the cheque drawn by you in his favour. There have been numerous cases , where court has punished the guilty.

2. Loss of credibility - For any honourable man in general and businessman in particular, his credibility and integrity is very dear to him. An act of bouncing a cheque results in loss of credibility and can seriously hamper the business prospects of a businessman. His future dealings with his creditors might be adversely impacted.

3. Bad credit history - An incident of bouncing a cheque does negatively impact your credit score (CIBIL,FICO ,SATYAM etc) . This credit score will go to all the banks and financial institutions and will be viewed negatively by them. Next time when you apply for a loan with them, they may not approve the loan to you or in case they do, they may charge you higher rate of interest as they will consider you as less reliable borrower.

4. Blot on your bank statement - Cheque bounces are also captured and recorded in your bank statements. Bank statements are required as a mandatory documents by all banks and financial institutions when an applicant approaches them for a loan. Any cheque bounces in your bank statement will make your case weaker and your chances of getting a loan might suffer a setback.

5. Cheque Bounce Charges - Bouncing a cheque also attracts direct monetary fine. Your banker will charge a cheque dishonour fee to you . And if you bounce an EMI cheque of another bank, then you will have to pay cheque dishonour fee to the second bank as well. So, bouncing one cheque can set you back monetarily as well.

6. You may have to pay more than the original amount - In case the other party were to take you to court on the issue of bouncing cheque and not paying his amount, the court may direct you to clear his rightful due along with an interest which is compounded . This can make the total amount payable to the other party by you a much larger sum than the original amount.

7. Bank may not issue you any more cheque leaf/book - Banks generally want to discourage people from bouncing cheques and as such they do ,at times, refrain from issuing fresh cheque book/leaf to the habitual defaulters in this regard.

In , the end, I am sure , you would agree with me that bouncing a cheque is something we should avoid at all costs as it can have very detrimental effect on us.

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