What changed
Earlier, collecting account payee cheques through third-party accounts of co-operative credit societies was prohibited. Now, RBI has relaxed this for cheques up to ₹50,000, allowing banks to collect such cheques for credit to the society's account, with the condition that the proceeds are passed on to the member-payee. This addresses the difficulty faced by society members who lack bank accounts and are not clearing house sub-members.
What it means for you
For banks dealing with co-operative credit societies, this circular provides a clear, limited exception to the general prohibition on third-party cheque collection. Banks can now facilitate cheque encashment for society members without violating the account payee crossing rules, but must maintain strict documentation and due diligence. The ₹50,000 cap and written undertaking requirement reduce risk, but banks remain liable for any claims by the true owner, so negligence must be avoided.
What you must do
- Update internal policies to allow collection of account payee cheques up to ₹50,000 for co-operative credit societies, subject to conditions.
- Obtain a written undertaking from the society that proceeds will be credited only to the member-payee's account upon realization.
- Conduct proper due diligence on the co-operative credit society and ensure KYC records of members are available for scrutiny.
- Train staff on the new exception and the need to act in good faith without negligence to protect against claims by the true owner.
Who it affects
State and Central Co-operative Banks (StCBs/DCCBs), Co-operative credit societies and their members, Collecting banks handling third-party cheque deposits
What is the maximum cheque amount allowed under this relaxation?
The relaxation applies only to account payee cheques drawn for an amount not exceeding ₹50,000.
Do we need a written agreement from the co-operative credit society?
Yes, banks must obtain a clear written representation from the society that, upon realization, the cheque proceeds will be credited only to the account of the member who is the payee.
Are banks still liable if the true owner of the cheque makes a claim?
Yes, the circular does not affect the rights of the true owner. Banks must prove they acted in good faith and without negligence while collecting the cheque.