Budget 2017: Cheque dishonour may attract stricter penalty, new watchdog for payment systems

The government may amend the Negotiable Instruments Act to ensure that the problem of dishonoured cheques is resolved quickly. This is likely to mean that dishonoured cheques would attract stricter penalty than at present. So people issuing cheques without sufficient funds need to beware and those unable to encash such cheques are likely to have recourse to a better redressal system.

The Finance Minister said in his Budget 2017 speech today: "As we move faster on the path of digital transactions and cheque payments, we need to ensure that the payees of dishonoured cheques are able to realise the payments. The government is, therefore, considering the option of amending the Negotiable Instruments Act suitably."

This step is clearly aimed at reducing the gap of 'surety of delivery' between cash and cheques. Currently, Section 138 of Negotiable instruments Act, 1881 governs dishonour of cheques, stating the same as a criminal offence. The defaulter can be punished with imprisonment of up to 2 years or penalty or both.

Payment systems in India to get new regulatory authority
To further promote cashless transactions, FM Arun Jaitley has also proposed another major change. A proposal for a separate Payments Regulatory Board under Reserve Bank of India (RBI) has been made. This board will replace the existing Board for Regulation and Supervision of Payment and Settlement Systems. The same will require changes in Payment and Settlement Systems Act, 2007. The proposed Board will have RBI Governor as Chairperson, Deputy Governor as member in-charge of Payments and Settlements Systems, one officer of RBI as member and three nominated members by the central government.

The board will be empowered to devise and govern, granting authorisation to operate payment systems, frame policies and standards to regulate the same, among other things. The creation of this board was one of the recommendations of Committee of Digital Payments, constituted by the Ministry of Finance, headed by Ratan P. Watal.

The report compared Payment Systems Board in various countries and stated some of their functions, such as:
*Determining rules for participation in payment system, including rules for new participants.
*Setting standards for safety and efficiency by providing mandatory technical requirements, procedures and performance benchmarks.
*Arbitration on disputes.