Dishonoured Cheque Meaning: Reasons, NACH Failure, Bank Charges & Legal Section 138 Guide

A dishonoured cheque refers to a cheque that a bank refuses to process due to certain issues, rendering it invalid for payment. This situation occurs when the bank declines to transfer funds from the payer’s account to the payee’s account.

Reasons why cheques get dishonoured:

1. Insufficient funds: The payer's account lacks the required balance to cover the cheque amount.
2. Signature mismatch: The signature on the cheque does not match the one registered with the bank.
3. Post-dated cheque: The cheque is presented before its valid date.
4. Stale cheque: The cheque is presented after the expiry period (usually three months from the issuance date).
5. Alterations: Any visible corrections or overwriting on the cheque can lead to dishonour.

Implications for customers:

Dishonoured cheques can result in penalties, strained relationships with the payee, and even legal consequences under the Negotiable Instruments Act. Understanding the reasons behind cheque dishonour is essential for maintaining financial discipline and avoiding unnecessary charges.

Common reasons for check dishonoured meaning & return codes

Cheque dishonour can occur due to various reasons, each associated with specific return codes provided by banks. These codes help identify the exact reason for the rejection.

Common reasons for cheque dishonour:

• Insufficient funds: The account does not have enough balance to honour the cheque.
• Account closed: The account linked to the cheque is no longer active.
• Signature mismatch: The signature on the cheque does not match the bank’s records.
• Alterations on the cheque: Any corrections or overwriting on the cheque can lead to rejection.
• Incorrect date: Cheques with incorrect or invalid dates are not processed.
• Exceeding withdrawal limit: The cheque amount exceeds the account’s permissible withdrawal limit.
• Non-compliance with MICR standards: Cheques that do not meet MICR (Magnetic Ink Character Recognition) standards may be dishonoured.

Cheque return codes and their meanings:

• Code 01: Insufficient funds.
• Code 02: Account closed.
• Code 03: Signature mismatch.
• Code 04: Stale cheque.
• Code 05: Post-dated cheque.

These return codes are used by banks to inform customers about the specific issue, enabling them to take corrective actions.

Cheque dishonoured charges: Bank penalties and lender fees

Banks and lenders impose penalties for dishonoured cheques, which vary based on the institution and the transaction type. Below is a table summarising common charges:

For Bajaj Finserv-specific fees, visit the official fees and charges page.

What is cheque NACH dishonoured meaning for loans?

Understanding NACH

NACH, or National Automated Clearing House, is a centralised system introduced by the National Payments Corporation of India (NPCI) to facilitate seamless auto-debit transactions for recurring payments like EMIs and utility bills.

NACH payment failures for loans

A cheque NACH dishonour occurs when the automated payment process fails. This can happen due to reasons such as insufficient funds, expired mandates, or incorrect bank details.

Implications of NACH failures:

• Late fees: Borrowers may incur late payment charges due to missed EMI payments.
• Credit score impact: Repeated NACH failures can negatively affect your CIBIL score, making it harder to secure future loans.

NACH dishonour meaning: Why your EMI auto-debit failed

Here are common reasons for NACH failures:

• Insufficient funds in your account.
• Expired or invalid auto-debit mandate.
• Incorrect or outdated bank details.
• Technical errors in the banking system.
• Account closure or inactivation.

Follow these steps to resolve NACH failures:

1. Check your bank account balance: Ensure your account has sufficient funds to facilitate the transaction.
2. Verify bank details: Log in to your bank account or mobile banking app to confirm that your account details are accurate and up to date.
3. Renew your mandate: Update your NACH mandate if it has expired. Contact your lender or bank for assistance.
4. Set reminders: Use mobile apps or calendar notifications to remind yourself of upcoming payment dates.
5. Make manual payments: If auto-debit fails, visit your lender’s website or app to pay your EMI manually.
6. Contact customer support: Reach out to Bajaj Finserv customer care for guidance and assistance in resolving the issue.

Set up your auto-debit mandate now.

Legal consequences: Section 138 (NI Act) vs Section 25 (PSS Act)

Dishonoured cheques can lead to legal action under specific laws. Here is a comparison:

Impact on your Bajaj Finserv Insta EMI Card and CIBIL score

Dishonoured cheques and NACH failures can negatively affect your Bajaj Finserv Insta EMI Card and CIBIL score in the following ways:

Consequences for Bajaj Finserv Insta EMI Card:

• Temporary suspension of card functionality.
• Rejection of new EMI transactions until dues are cleared.

Impact on CIBIL score:

• Missed payments can lower your credit score.
• A poor credit score can reduce your chances of loan approval in the future.

Tips to prevent negative impacts:

• Maintain a sufficient balance in your account.
• Set up auto-reminders for payment due dates.
• Regularly review your bank details and mandates.

Check your payment summary instantly with your registered mobile number.

5 tips to avoid cheque and NACH dishonour charges

1. Ensure your bank account has sufficient balance before payment due dates.
2. Set up reminders for EMI and bill payments to avoid missed deadlines.
3. Double-check cheque details, including date, signature, and amount.
4. Regularly update your bank records and auto-debit mandates.
5. Contact your lender immediately if any payment issues arise.

Get your NOC now.

Conclusion: Maintaining financial discipline

Managing cheques and NACH payments responsibly is essential to avoid penalties, legal consequences, and credit score impacts. By staying proactive, verifying details, and maintaining a sufficient balance, you can protect your financial health and ensure smooth payment processes.