Cheques and Drafts Will Be Valid Only For 3 Months : RBI

Come 1st April 2012, a new regulation from Reserve Bank of India (RBI). Cheques, Demand drafts(DD), banker’s cheques, pay orders have to be encashed within three months. Earlier the time limit was six months.

The reason behind reducing the validity period of these financial instruments is to stop the increasingly recurring issue that takes place by circulating these six month validity instruments like cash in the market. The new regulation is to curb the undue advantage taken by some people who had circulated them in the form of cash.

With this norm, the banking regulator seeks to stop the issue of transferring a cheque from a person in whose favor it was originally issued to another, in return for a fee. Thus the misuse of receiving receipt of commission for transferring cheques by banks will be reduced soon.

Also, banks have been asked to hold back the account payee cheques, where the payee has not been mentioned. By this, such account payee cheques will not be credited to any entity other than the payee intended.

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