Banks advised to record accurate reasons for dishonouring cheques

The State Bank of Pakistan has advised all the banks to meticulously record correct and complete reasons for dishonouring cheques. The SBP has warned of punitive action against the banks which fail to do so under the relevant provisions of law.
The State Bank has noticed that some banks are not exercising due care in recording complete and correct reasons for dishonouring cheques. Some banks return unpaid cheques with the remarks of "insufficient funds" even when actual reasons of dishonour or defects in the instruments are different.
Since dishonouring of a cheque due to insufficiency of funds entails consequences under section 489-F of the Pakistan Penal Code, incorrect, incomplete or misleading reasons recorded by banks can be used by unscrupulous elements against innocent accountholders. Besides bad name, the situation exposes banks to legal action by the aggrieved accountholders.
"The foregoing practice on the part of some banks has been seriously viewed by the State Bank," says a circular issued to all banks/DFIs on Monday. "Banks are, therefore, strictly advised to record correct and complete reasons for dishonouring cheques failing which State Bank will take punitive action under relevant provisions of law," the circular added.