Legal Question in Banking Law in India

I have two questions regarding cheque return.

Fact: I have a joint Savings Account with HDFC Bank, where a any one of the account holders is empowerd to issue cheque and withdraw fund.

where, the other account holder from the said account issued two cheques to me

that got returned, when presented in my another bank account, due to insufficient fund.

So the HDFC Bank charged Rs. 350/- each from said joint account for two bouncing first,

and (after 10 days) also charged some amount for Service Tax and Education Cess on the return charges.

So my questions are:

(1) How HDFC bank has decided that thay can levy Rs. 350 as return charge but not more or less amount, what RBI Guideline about this?

(2) (a) In similar cases, I have observed, other banks only charge respective return charge but not the ''service tax'' or ''education cess'' on the charged amount but WHY HDFC is different here? i.e. charging ''service tax'' or ''education cess'' also?

(2) (b) Whether return charge can be termed as ''Service''? (Service to customers), if yes, ''service tax'' seems to be reasonable then.


Asked on 11/27/07, 4:54 am

3 Answers from Attorneys
G. M. Gupta gmguptaandassociates

Re: I have two questions regarding cheque return.

though any activity on your account will be providing service to you however the banks generally enrich themselves by cheating customers by levying high charges.

you write to the bank top officials to give you details about the rbi guidelines in this regard and ask them how they are charging this much charges.

they may give you some discount.

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Answered on 12/01/07, 9:47 am
Vijay Chandavale Advocate Vijay Chandavale & Associates

Re: I have two questions regarding cheque return.

In my opinion such levying of cheque returning charges is illegal. however the said bank must have entered into a agreement from you while opening the said account . There must be some other connected facts which are beyond your knowledge . The cheque returning charges should be nominal or related to expenses incurred by bank . However if such charges are agreed by you while opening account . you can challenge the same in Consumer Court . The retruning of cheque charges doesnot atract service tax however they must have stated it as service charges not service tax as thought by you .

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Answered on 11/28/07, 7:18 am
Vijay Chandavale Advocate Vijay Chandavale & Associates

Re: I have two questions regarding cheque return.

In my opinion such levying of cheque returning charges is illegal. however the said bank must have entered into a agreement from you while opening the said account . There must be some other connected facts which are beyond your knowledge . The cheque returning charges should be nominal or related to expenses incurred by bank . However if such charges are agreed by you while opening account . you can challenge the same in Consumer Court . The retruning of cheque charges doesnot atract service tax however they must have stated it as service charges not service tax as thought by you .

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Answered on 11/28/07, 7:19 am


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