What changed
RBI observed that some banks recently issued demand drafts of Rs 50,000 and above against cash deposits, violating the 1991 circular. The regulator has now reiterated strict compliance with the original instructions, warning that any breach will be treated as a serious regulatory concern.
What it means for you
Banks must ensure that all demand drafts, mail transfers, telegraphic transfers, and travellers cheques for Rs 50,000 and above are funded only through account debits or valid instruments, not cash. This is to prevent misuse of banking channels and maintain financial system integrity. Non-compliance could invite regulatory action.
What you must do
- Reinforce training for branch staff on the 1991 circular's cash restriction for instruments of Rs 50,000 and above.
- Conduct an internal audit to identify any recent instances of cash-based issuance of such instruments.
- Implement system-level controls to block cash transactions for demand drafts and similar instruments above the threshold.
- Report any past violations to the concerned RBI regional office immediately.
Who it affects
All Regional Rural Banks, Branch managers and cash handling staff, Compliance and audit teams
What instruments are covered under this restriction?
Demand drafts, mail transfers, telegraphic transfers, and travellers cheques for Rs 50,000 and above must not be issued against cash.
What are the acceptable modes of payment for such instruments?
Only debit to the customer's account or against cheques or other instruments tendered by the purchaser are allowed.
What happens if a bank violates this instruction?
RBI has stated that any violation will be viewed seriously, implying potential regulatory action including penalties.