When a cheque is returned with the reason "drawer signature differs," it means the signature on the cheque does not match the signature on record with the issuing bank. This discrepancy can lead to the cheque being dishonoured.
Common causes of this issue include:
- The signature on the cheque does not match the bank's records due to changes in the drawer’s signature over time.
- The drawer inadvertently signed the cheque differently than their usual signature.
- The cheque was signed by an unauthorised person.
- The cheque may be forged or tampered with.
How to avoid or resolve this issue:
- Ensure that your signature is consistent with the one registered with your bank.
- If your signature has changed, update it with the bank by submitting a new specimen signature.
- Verify your signature before issuing a cheque to avoid inadvertent mismatches.
- If your cheque is rejected due to a signature mismatch, contact your bank immediately to verify and resolve the issue.
Legal consequences: Is 'signature differs' a Section 138 offence?
Section 138 of the Negotiable Instruments Act, 1881, addresses the dishonour of cheques due to insufficient funds or if the cheque amount exceeds the arrangement with the bank. While "drawer signature differs" is a reason for cheque dishonour, it does not directly fall under the purview of Section 138.
However, the consequences can still be significant:
- Reputation Damage: Frequent cheque rejections can damage your reputation with the payee and your bank.
- Legal Action: Although "signature differs" is not a Section 138 offence, the payee may still take legal action for non-payment, leading to financial and legal complications.
- Financial Penalties: Banks may levy charges for cheque return, adding to your financial burden.
Remedial actions:
- Update your signature with your bank to avoid future mismatches.
- Communicate promptly with the payee and your bank to resolve the issue.
- If legal action is taken, seek legal advice to address the matter appropriately.
What is payment stopped by drawer? Risks for loan customers
"Payment stopped by drawer" occurs when the person issuing the cheque (drawer) instructs their bank to halt the payment before the cheque is cleared. While this might seem like an easy way to stop a payment, it can have significant consequences, especially for loan customers.
Risks for loan customers include:
- Loan Default: Stopping payment on an EMI cheque can lead to defaulting on your loan, impacting your repayment schedule.
- Penalty Charges: Lenders may impose penalties or late payment fees for missed EMIs.
- Credit Score Impact: A missed EMI payment can negatively affect your credit score, making it harder to secure loans in the future.
It is always better to communicate with your lender if you are facing financial difficulties, rather than stopping payment on an EMI cheque.
Return codes list: Decoding ‘refer to drawer’ and other memos
When a cheque is returned, banks often use specific return codes to indicate the reason. Below is a table explaining common cheque return codes:
| Return Code | Description |
|---|
| Refer to Drawer | The account holder’s bank has refused payment, often due to insufficient funds. |
| Effect Not Cleared | The deposited funds have not yet cleared, so the cheque cannot be processed. |
| Account Frozen | The account is frozen, possibly due to legal or regulatory restrictions. |
| Signature Differs | The signature on the cheque does not match the bank’s records. |
| Insufficient Funds | The account does not have enough balance to honour the cheque. |
| Payment Stopped by Drawer | The drawer has instructed the bank to stop payment on the cheque. |
Payment stopped by drawer vs. attachment order: Key differences
Both "payment stopped by drawer" and "attachment order" involve halting payments, but they differ significantly in their implications and use cases.
| Aspect | Payment Stopped by Drawer | Attachment Order |
|---|
| Definition | Instruction by the drawer to stop a cheque payment. | Court order to freeze a bank account. |
| Initiator | Account holder (drawer). | Court or legal authority. |
| Applicability | Specific to the cheque in question. | Affects the entire account. |
| Impact on Loans | May result in EMI default and penalties. | Prevents all transactions, including loan EMIs. |
| Resolution | Can be revoked by the drawer. | Requires a court order to lift the freeze. |
For loan-related matters, "payment stopped by drawer" is more relevant as it directly impacts EMI payments. However, an attachment order can have broader implications on your financial stability.
Maintaining your credit health: Avoiding drawer-side errors
Errors like "signature differs" or "payment stopped by drawer" can harm your credit health. Here are some tips to avoid such issues:
- Always ensure your signature matches the one registered with your bank.
- Notify your bank immediately if your signature changes.
- Avoid stopping payment on cheques unless absolutely necessary. Communicate with the payee or lender to find alternative solutions.
- Maintain sufficient funds in your account to avoid cheque bounces.
- Regularly review your bank statements and cheque transactions to identify discrepancies.
By following these tips, you can safeguard your credit score and maintain trust with your financial institutions.
Next steps: What to do if your EMI cheque is returned
If your EMI cheque is returned, follow these steps to resolve the issue and prevent future occurrences:
- Contact your bank: Reach out to your bank immediately to understand the reason for the cheque return.
- Notify your lender: Inform your lender about the issue and request an alternative payment option to avoid penalties.
- Rectify the issue: If the return was due to a signature mismatch, update your signature with the bank. For insufficient funds, ensure your account has adequate balance.
- Reissue the cheque: Once the issue is resolved, issue a new cheque to your lender or follow their instructions for repayment.
- Monitor your account: Regularly check your account balance and transactions to prevent future cheque-related errors.
