What is 'Positive Pay' mechanism introduced by the RBI?

To reduce instances of fraud, the Reserve Bank of India (RBI) has introduced a new mechanism known as 'Positive Pay' for all the cheques valued above Rs. 50,000. 

As per RBI Governor Shaktikanta Das, the positive pay system is introduced to enhance the safety of cheque payments for all the cheques of value Rs. 50,000 and above. The 50,000 cap will cover approximately 20% of transactions by volume and 80% by value. He further added that the guidelines for the same will be issued soon.  

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What is Positive Pay mechanism?

The positive pay mechanism is used by the commercial banks to companies as a fraud-prevention system against forged, altered and counterfeit cheques. 

In this mechanism, one needs to share the details of the cheque issued with the bank before handing it over to the beneficiary. The details include cheque number, cheque date, payee name, account number, amount, etc. Also, a picture of the front and backside of the cheque is shared with the bank. 

When the beneficiary submits the cheque in the bank to cash it, the details on the cheque are matched with the details provided earlier via Positive Pay mechanism. If the details match, the encashment is done.

What is Reverse Positive Pay mechanism?

In the Reverse Positive Pay mechanism, the issuer monitors the cheques on its own and inform the bank to decline a cheque. The bank notifies the company daily about the cheques presented to it and clears the cheques approved by the company.   

Does any bank uses this method in India?

Yes, ICICI bank follows the procedure of positive pay since 2016 irrespective of the amount on the cheques. 

As per RBI Governor, to promote the innovation in the financial sector, the central bank (RBI) will set up an innovation hub in the country. Also, a scheme of retail payments in the offline mode via cards and mobile devices, and a system of ODR (Online Dispute Resolution) mechanism will also be introduced soon. 

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