Prohibition on Crediting Proceeds to Third Party Account

Date: Sep 07, 2009

Collection of Account Payee Cheques - Prohibition on Crediting Proceeds to Third Party Account

RBI/2009-10/148 RPCD.CO.RF.BC.No.18 /07.38.03/2009-10 September  7, 2009 All State Co-operative Banks (StCBs) and District Central Co-operative Banks (DCCBs) Dear Sir, Collection of Account Payee Cheques - Prohibition on Crediting Proceeds to Third Party Account Please refer to our circular RPCD.CO.RF.BC.No.78/07.38.03/2005-06 dated April 27, 2006 in terms of which banks are prohibited from crediting 'account payee' cheque to the account of any person other than the payee named therein. 2. It has been brought to our notice that some banks are collecting third party account payee cheques on behalf of co-operative credit societies who are their constituents. While reiterating that such practice of collection of third party cheques is not permissible, in order to facilitate collection of cheques from the payment system angle, account payee cheques deposited with  the sub-member for credit to their customers' account can be collected by the member bank (referred to as the sponsor member) of the Clearing House. Under such arrangements, there should be a clear undertaking from the sub-member to the effect that the proceeds of the account payee cheque will be credited to the payee's account only, upon realisation. Yours faithfully, (R C Sarangi) Chief General Manager

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CA. V.M.V.SUBBA RAO
Chartered Accountant
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