What changed
RBI issued a circular on October 28, 2011, urging NBFCs to adopt the Government's Green Initiative. It specifically asks NBFCs to boost electronic payment usage, stop post-dated cheques, and gradually move away from cheques in daily transactions.
What it means for you
NBFCs must shift from paper-based to digital payment methods to align with government sustainability goals. This will reduce operational costs, speed up settlements, and improve accuracy. Lenders should prepare for a long-term move away from cheques.
What you must do
- Increase adoption of electronic payment systems like NEFT, RTGS, and UPI in customer transactions.
- Phase out acceptance and issuance of post-dated cheques in loan repayments and other dealings.
- Gradually reduce cheque usage across all business operations to meet green compliance.
- Train staff and update internal processes to support digital-first payment workflows.
Who it affects
All Non-Banking Financial Companies (NBFCs), Residuary Non-Banking Companies (RNBCs)
Why is RBI asking NBFCs to phase out cheques?
As part of the Government's Green Initiative, RBI wants NBFCs to reduce paper usage and adopt electronic payments for cost-effective, faster, and more accurate settlements.
Does this circular apply to banks as well?
No, this specific circular is addressed only to NBFCs and Residuary Non-Banking Companies, though similar green initiatives may apply to other financial entities.
What is the deadline for phasing out cheques?
The circular does not specify a deadline; it requests proactive steps and gradual phase-out, so NBFCs should start immediately but without a fixed end date.