What changed
As per a 2011 RBI circular, UCBs were previously prohibited from collecting account payee cheques for anyone other than the payee. The circular now allows collection for co-operative credit societies up to ₹50,000, subject to safeguards.
What it means for you
This eases collection difficulties for co-operative credit society members who lack bank accounts. Banks must ensure the society undertakes to credit proceeds only to the payee member, and must comply with KYC and the Negotiable Instruments Act. Banks remain liable if the true owner claims the cheque.
What you must do
- Update internal policies to allow collection of account payee cheques up to ₹50,000 for co-operative credit societies.
- Obtain a written undertaking from the society that proceeds will be credited only to the payee member's account.
- Subject the society to standard KYC norms and sign an agreement ensuring society maintains KYC documents for its members.
- Train staff on the limited scope (₹50,000 cap) and the need to act in good faith without negligence.
Who it affects
Primary (Urban) Co-operative Banks, Co-operative credit societies, Members of co-operative credit societies without bank accounts
What is the maximum cheque amount allowed under this circular?
The circular allows collection of account payee cheques up to ₹50,000 only.
Can the proceeds be credited to the society's account instead of the payee member?
No. The bank must obtain a written undertaking from the society that proceeds will be credited only to the account of the member who is the payee named in the cheque.
What happens if the true owner of the cheque claims it later?
The bank must prove it acted in good faith and without negligence while collecting the cheque. The rights of the true owner are not affected by this circular.