With the introduction of this new system, check fraud will be stopped. Having separate levels of verification and authentication will enhance the security of the transaction by check. It has been compulsorily implemented in banks.
From August 1, all the big banks of the country will have their own positive pay system That is, PPS has been implemented. These banks have asked their customers to register under PPS. Banks have issued notification for this. The Reserve Bank has made this system mandatory for the payment of checks of five lakhs or more. If these rules are not followed, the bank can refuse to clear the check. So what is this positive pay system and how does it work? Let’s understand.
The Reserve Bank had decided to introduce a ‘positive pay system’ in the year 2020 to prevent banking frauds. According to the RBI website, under the positive pay system, the main details of high value checks are verified. Under this process, the person issuing the check electronically gives certain minimum details of the check to the drawee bank through SMS, mobile app, internet banking, ATM etc. For example, date of cheque, name of beneficiary, amount etc. These details are given electronically through email, mobile banking app or internet banking and they are crosschecked with the check through CTS i.e. Check Truncation System.
What happens in PPS
Later, when the check is presented to another bank for making payment, the details are first verified. Cash will be given to the depositor on matching the details, else the check will be returned without payment. This process has been developed by NPCI i.e. National Payments Corporation of India. Most of the banks in the country have implemented this system. RBI had implemented this system on payment of more than 50 thousand rupees, but gave freedom to banks that they can do so on payment of 5 lakh or above. Banks may have different limits for check amounts.
Advantages of PPS
With the introduction of this new system, check fraud will be stopped. Having separate levels of verification and authentication will enhance the security of the transaction by check. The Reserve Bank has told about this system long ago, but banks were given time to implement it. Finally, from August, the positive pay system has been implemented.
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