01) It is quite often argued when the Payee or Holder in due course or Holder for value or Holder hereinafter referred to as Payee for brevity presents a cheque for collection dishonoured, the Collecting Banker slaps Collection Charges on each and every presentation, an additional levy, at his no fault, on the crippled victim in race of Drawers chase.
02) While levying the Drawer contended to be justified, simultaneous hit on the unpaid Payee with bank charges is argued to be injustice. The rationale behind such Collecting Banker charges whether or not the cheque is honoured goes as under.
03) A Banker who undertakes to collect various types of Instruments defined under Indian Negotiable Instrument Act, 1881 (NI Act) representing money on behalf of his Customer or on his own behalf from the Drawer of such instruments is termed as the Collecting Banker.
Responsibilities of Collecting Banker:
04) As per Section 131, a banker who has in good faith and without negligence received payment for a customer of a cheque crossed generally or specially to himself shall not, in case the title to the cheque proves defective, incur any liability to the true owner of the cheque by reason only of having received such payment.
05) Explanation I: A banker receives payment of a crossed cheque for a customer within the meaning of this section notwithstanding that he credits his customer’s accounts with the amount of the cheque before receiving payment thereof.
06) Explanation II: It shall be the duty of the banker who receives payment based on an electronic image of a truncated cheque held with him, to verify the prima facie genuineness of the cheque to be truncated and any fraud, forgery or tampering apparent on the face of the instrument that can be verified with due diligence and ordinary care.
07) Collects in good faith and without negligence on behalf of his Payee Customer, Acts as his agent for collection, Scrutinize the instrument, Guards against its fraudulent use, Checks the endorsement, Presents the instrument in due time, Collects the proceeds into the payee’s account, Issues Notice of dishonor and return the instrument.
08) The collection charges levied from the Payees account is nominal when compared to the Duties and Responsibilities undertaken, the Cost of funds involved including the Operational costs.
09) The moment a cheque is deposited into Payees account for collection, the collecting banker has to earmark such sum lying in shadow/ actual balance from bank owned funds or borrowed from call money market at higher rate on which no interest is earned.
10) The Bank parts funds till receipt from the Drawers bank, the cost of such idle funds during the interregnum period as a whole for any banker added together would be huge.
11) The cheque return charges nominal in the good old days is enhanced to discourage both ends, the Drawer and the Payee thereby limit transactions of ‘Window Dressing’.
12) For cash transactions to deposit/ transfer to different account within intra/inter City/State or different States or in the same/different bank, charges are applied.
13) Charges are also recovered not only to cover operational costs but also to discourage cash transactions to prevent tax evasion, money laundering, unearth black money besides save paper currency and reduce risk.
14) To encourage secured net banking through NEFT/ RTGS, as per Reserve Bank of India guidelines, the charges are kept NIL for lower slabs or very nominal for other higher range.
15) In a fiduciary system like Banking, for the justifications illustrated mentioned above the collection charges levied by Collecting Banker is quite negligible though the unpaid Payee feels the untimely cannot be avoided.■
With 35 years experience as Director, Government of India and Central Bank, Dr. Katta Venkata Rama Krishna is a practicing Advocate specialized in Management, Banking & Finance, HR, Labor & Service Law, Family Law, Property Law, Civil Law, Corporate Law and IPR. A Post Graduate in Economics and MPhil in Labor Studies, Dr. Rama Krishna bagged Gold Medals in MBA, BL, PG in Temple Culture and Doctor of Medicine (London); besides number of degrees/ diplomas in diversified fields like Chemistry, Psychology, Training, Cyber Laws, including Doctorates in HR and Juvenile Diabetes and National and International publications.