What is Cheque Bounce? How to Deal with Cheque Bounce?

Posted on Tuesday, March 11th, 2025 | By IndusInd Bank

With the rise of UPI and internet banking, digital payments and transactions have become common. However, cheques remain a safe and preferred mode of payment for many.

But, there are situations where the bank cannot process or clear the cheque due to certain reasons. This is referred to as a bounced cheque or a dishonoured cheque. 

If things are not taken care of, a bounced cheque can even attracts legal action. Let’s learn more. 

What is a Bounced Cheque?

A bounced cheque occurs when the bank cannot process the cheque. This can be due to insufficient funds, discrepancies in the signature, or other issues. When a cheque is dishonoured, the bank returns it to the issuer with a cheque return memo indicating the reason for the bounce.

Here are some reasons that may lead to a cheque bounce case:

1. Insufficient Funds

The most common reason is a lack of sufficient funds in the issuer’s account.

2. Signature Mismatch

A discrepancy between the signature on the cheque and the signature on record with the bank.

3. Post-dated Cheques

Presenting a cheque before the date mentioned on it.

4. Account Closure

The cheque issuer’s account has been closed.

5. Overwriting on Cheque

Any alterations or overwriting on the cheque can cause it to bounce.

6. Exceeding Payment Limits

Issuing a cheque for an amount exceeding the account’s payment limits or overdraft facility.

In case a cheque bounce occurs due to insufficient funds in the issuer’s account, it constitutes an offence under the Negotiable Instruments Act, 1881. Here, the payee (cheque recipient) can send a cheque bounce notice to the issuer. Keep reading to know more.

What Happens When a Cheque Bounces?

The following sequence of events occurs when a cheque bounces: 

1. Resubmitting the Cheque

The recipient may choose to resubmit the cheque for clearance. If the issue causing the bounce is resolved (e.g., sufficient funds are now available), the cheque may be processed. The payee must also pay any cheque bounce charges, if applicable. 

2. Issuance of a Cheque Bounce Notice

The payee must send a cheque bounce notice to the issuer within 30 days of the cheque bounce and should demand the payment within 15 days.

3. Legal Action after 15 Days of Cheque Bounce Notice

If the issuer fails to make the payment within the cheque bounce case time limit of 15 days, the payee can take legal action. They can file a complaint against the cheque bounce before the magistrate. The payee must do this within 30 days after the 15-day cheque bounce case time limit expires. 

How to Respond to a Cheque Bounce Case?

Here’s how one should deal with a cheque bounce case procedure: 

1. Review the Notice

Carefully review the cheque bounce notice to understand the claims and the required actions.

2. Settle the Amount

Pay the amount mentioned in the notice within 15 days along with any cheque bounce penalty amount. It is the ideal solution to avoid further legal proceedings. 

3. Consult a Lawyer

If the matter escalates to a legal case, consult a lawyer to understand the cheque bounce case procedure and prepare your defence.

4. Create Defence

Collect all relevant documents and evidence, such as bank statements, communication records, and any other proof to support your case.

5. Court Appearance

Attend court hearings as required and comply with legal procedures.

Please note the above tips are for general information purposes. Consult a legal/professional expert for more guidance. 

Also Read: What are the Different Types of Cheques?

Conclusion

Dealing with a dishonoured cheque case requires patience and understanding. If you find yourself in such a situation, addressing the issue on time and seeking legal advice can help. 

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Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.