Cheque Bounce : Bank Charges, Penalities & Procedure

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What is a Cheque Bounce?

Updated on June 20, 2025 06:15:40 PM

The term cheque bounce literally means that a cheque issued by an individual has been returned without being honored.

There are many reasons why a cheque may bounce and thus when this happens, the bank sends back the cheque unpaid to the payee, usually they provide a comment why the cheque was rejected. The main causes of cheque bounce are that there is not enough money in the account to honor the cheque, the account may have been closed or there is a failure in matching the signature on the cheque. Any of these can result in the cheque being returned and this may cause real problems involving money and law to the two parties who are involved.

Table of Content

Common reasons for Cheque Bounce
Cheque Bounce Charges
Consequences of Cheque Bounce
Documents Required for Cheque Bounce Case
Legal Procedures for Cheque Bounce Cases
How to Respond to a Cheque Bounce Case
Conclusion
Why Litem Legalis?
FAQ

Common reasons for Cheque Bounce

Insufficient funds : One of the major causes of a cheque bounce is where the drawer does not have sufficient cash in his/her account to meet the amount of the cheque. In the case of a bounced cheque, if the account does not contain enough money to meet the amount written on the cheque, the bank will not accept the cheque.

Account closure : If the cheque is drawn on an account that has been closed, the bank cannot pay the cheque. This is usually witnessed when an account holder fails to rearrange cheque books after closing an account.

Signature mismatch : In case a person signs the cheque and the signature does not correspond to the one stored in the records of the bank, the cheque will be dishonored. This can be as a result of modification in the signature over time or where the signature on the cheque is not the same as the person to whom the cheque is made payable to.

Cheque Bounce Charges

Name of the Banks	Charges
SBI	Cheque/bill deposited with SBI returned unpaid by others (Local/Outstation) Cheque/bill up to ₹1.00 lacs – ₹150/- + GST Cheque/bill above ₹1.00 lacs – ₹250/- + GST Cheque Returned Charges for Cheques drawn on SBI (for insufficient funds only) (for all segments) ₹500/- + GST (irrespective of the amount) Cheque returned charges for Cheques drawn on SBI (for technical reasons) for all segments when the customer is at fault. ₹150/- + GST
HDFC Bank	Savings A/c Outward: ₹100/- Inward: First cheque return in a quarter – ₹350/-. From second cheque return in the same quarter – ₹750/- per return Current A/c Outward: ₹50/- Inward: ₹300/- Dishonour of Outstation Cheques Regular Savings Outward: ₹100/- Inward: ₹350/- Senior Citizen Account Outward: ₹80/- Inward: ₹350/-
ICICI Bank	Local Charges Cheque deposited by the customer – ₹100/- (for every cheque return for financial reasons) Cheque issued by the customer – ₹350/- (for one cheque return per month); ₹750/- per return in the same month for financial reasons. ₹50/- for non-financial reasons except for signature verification for every cheque return for financial reasons. Outstation Charges Outstation cheque deposited by the customer – ₹150/- + other bank charges at actuals per cheque.
Axis Bank	Return of cheques deposited at the home branch for local clearing – ₹500/- per cheque

Consequences of Cheque Bounce

Financial Penalties: Bouncing of a cheque exposes the maker to many financial penalties. This involves charges from the banks and any litigation cost arising from the recipient of the cheque. These fines may add up to a lot, especially if the problem is not solved promptly.

Criminal Prosecution: According to Section 138 of the Negotiable Instruments Act, issuing a cheque that bounces is a punishable offense. Criminal prosecution for the issuer may extend to punishment in the form of a fine, twice the cheque amount, or imprisonment that might extend up to two years.

Civil Suits: In addition to this criminal liability, he may also be exposed to a civil action by the payee for recovery of the amount related to the bounced cheque. This entails further legality expenditure and financial burden on the issuer.

Documents Required for Cheque Bounce Case

Original Cheque: The original cheque is the main evidence in a Cheque Bounce Case. It will be presented as evidence that a payee does indeed attempt to make a payment, and such documentation is essential in the situation of a court case.

Bank Memo Showing Cheque Bounce: The bank memo is issued by the bank at the instance when a cheque gets dishonored. This document mentions the precise reason for cheque bounce, like insufficient funds or mismatched signature, and is very essential to back up a claim.

Demand Notice and Proof of Delivery: A demand notice is issued to the drawer formally, requiring them to make the payment within the specified period therein. This is confirmed by proof of delivery through a registered mail receipt that the notice has been received by the drawer and hence may be prosecuted further.

Legal Procedures for Cheque Bounce Cases

Here is the step-wise instruction given below for responding to Cease and Desist letter:

Step 1- Send a Demand Notice:

The very first action before filing a court case for cheque bounce is sending the Demanding Notice to the drawerThe notice has to be made within 30 days from the time the cheque was returned by the bank.The notice should clearly state the following details:

The date of the cheque
The cheque number
The amount of the cheque
Cause of Dishonor of the cheque
A 15 day notice to make payment

Step 2: Await a Response

The issuer has 15 days from the date of receiving the notice to make the payment.If the issuer fails to make the payment within the 15-day period, the payee has the right to file a complaint in court.

Step 3: File a Complaint

The payee can go to court after the 15 days’ notice period has passed and the issuer has not paid.The complaint must be filed within 30 days from the date of expiry of the notice period, which must be not less than 15 days from the date of receipt of such notice by the aggrieved party.

The complaint must be in writing and contain the following information:

Name and address of payee.
Issuer name and address
The date of the cheque
The number of the cheque
The amount of the cheque
Why the cheque was dishonored
Copies of the cheque, the demand notice, and proof of delivery of the notice

Step 4: Required Documents

The payee needs to submit the following documents along with the complaint:

The original bounced cheque
The cheque return memo from the bank stating the reason for dishonor
A copy of the demand notice and proof of delivery (registered post receipt)
An affidavit stating the evidence

Step 5: Court Proceedings

Once the court receives the complaint, it will examine the documents and evidence provided.
If the court is satisfied with the case, it will summon the issuer to appear in court.
If the issuer fails to appear, the court may issue a bailable warrant against them.
The court will conduct a trial, which includes verifying documents, examining witnesses, and hearing arguments from both sides.

How to Respond to a Cheque Bounce Case

The first thing one has to do after receiving a legal notice with regard to the bounced cheque is to either reply to the legal notice or make the payment of the face value of the cheque. It is always better to seek legal advice from an attorney who specifically deals with bounced cheque matters. In cases where the cheque amount is paid instantly, the problem can usually be resolved on the spot.

The drawee can arrest the cheque bearer if he fails to respond to the legal notice or to pay the cheque amount within the stipulated 15 days In a case where an issuer fails to deposit the cheque amount, the drawee can present a formal complaint in court as a way of demanding justice against the cheque issuer.

Conclusion

In today's commercial world, knowing what cheque bouncing is and where it can take one could be pretty important. This means financial penalties besides possible prosecution under Section 138 of the Negotiable Instruments Act. If you ever issue or receive cheques, knowing the legal provisions and the law related to such issues will help keep you out of trouble or at least help you safeguard your interests. If faced with a cheque bounce situation, the reaction must be swift. A proper demand notice, collection of required documents, and adherence to the proper legal procedure can make a huge difference in the resolution of the matter. Every case is different; likewise, cheque bounce laws have too many complexities to be dealt with alone.Don't let a bounced cheque derail your financial journey contact Litem Legalis today for reliable legal support

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Frequently Asked Questions (FAQs)

What should I do if my cheque bounces?

If your cheque is dishonored, then immediately visit your bank and the payee. Make funds arrangements for payment of the amount. Reply promptly to any legal notice. Consult a lawyer regarding legal remedy to know about your liabilities under the Negotiable Instruments Act.

Can I be prosecuted for issuing a bounced cheque?

Yes, issuing bounced cheque, can lead to prosecution under section 138 of Negotiable Instruments Act. If not honored within 15 days from the receipt of demand notice from the payee, the drawer can be criminally prosecuted.

How can I avoid cheque bounce issues in the future?

Issue the cheque only if account balance is enough. Always recheck the detail of the cheque. Ensure that the signature is not missing or is correct. At the same time, confirm the balance in the account before issuance of post-dated cheques.

What is the latest rule for bounced Cheque?

Under Section 138, Negotiable Instruments Act of 1881, this very dishonoring of the cheque is an actionable offense. You might have to suffer one or some of the following fine, amounting to twice what the cheque is worth and 2 years in jail.

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