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Old 22nd October 2020, 13:32   #31
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Re: Federal Bank wants 6 blank cheques for car loan - Now what?

What happens if you give such blank cheques, but cancel them at the backend with the bank?
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Old 22nd October 2020, 13:57   #32
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Re: Federal Bank wants 6 blank cheques for car loan - Now what?

This is what RBI guidelines say regarding payment of EMIs through cheques -

Quote:
DPSS.CO.CHD.No./209/04.07.05/2013-14 July 24, 2013

The Chairman and Managing Director / Chief Executive Officer
All Scheduled Commercial Banks including RRBs /
Urban Co-operative Banks / State Co-operative Banks /
District Central Co-operative Banks / Local Area Banks

Dear Madam / Sir,

Migration of Post-dated Cheques (PDC) / Equated Monthly Instalment (EMI) Cheques to Electronic Clearing Service (Debit)

We invite a reference to our circular DPSS.CO.CHD.No.1622/04.07.05/2012-13 dated March 18, 2013 wherein all lending banks have been advised not to accept any fresh Post Dated Cheques (PDC) / Equated Monthly Installment (EMI) cheques in locations where the facility of ECS / RECS (Debit) is available and convert existing cheques in such locations into ECS / RECS (Debit) by obtaining fresh mandates.

2. However, instances of banks obtaining fresh cheques (both CTS-2010 and non CTS-2010 standard) in locations where the facility of ECS / RECS is available have been brought to our notice, thus necessitating a reiteration of our earlier instructions in this regard.

3. Accordingly, banks are advised to adhere to the following instructions with immediate effect :

a. No fresh / additional Post Dated Cheques (PDC) / Equated Monthly Installment (EMI) cheques (either in old format or new CTS-2010 format) shall be accepted in locations where the facility of ECS / RECS (Debit) is available. The existing PDCs / EMI cheques in such locations may be converted into ECS / RECS (Debit) by obtaining fresh ECS (Debit) mandates.

b. As indicated in our circular DPSS.CO.PD.No.497/02.12.004/2011-12 dated September 21, 2011, Section 25 of the Payment and Settlement Systems Act, 2007 accords the same rights and remedies to the payee (beneficiary) against dishonor of electronic funds transfer instructions under insufficiency of funds as are available under Section 138 of the Negotiable Instruments Act, 1881. Considering the protection available, there is no need for banks to take additional cheques, if any, from customers in addition to ECS (Debit) mandates.

c. Cheques complying with CTS-2010 Standard formats shall alone be obtained in locations, where the facility of ECS / RECS is not available.

4. The above instructions are issued under Section 18 of the Payment and Settlement Systems Act 2007 (Act 51 of 2007).

5. Please acknowledge receipt.

Yours faithfully,
Sd/-
(Vijay Chugh)
Chief General Manager

Unfortunately, the practice of obtaining blank and / or undated cheques continue by various banks, for which the following is a way out :

Quote:
Originally Posted by blackwasp View Post
.....Issue them the cheques. Immediately, go to your bank and issue stop payment notice to these....

Quote:
Originally Posted by Eddy View Post
What happens if you give such blank cheques, but cancel them at the backend with the bank?
What you are doing is 'stopping payment' of the cheques i.e. if at all these cheques are presented in future, it will be dishonoured (returned) by the Bank stating that the 'Payment has been stopped by the Drawer (account holder)'.

Last edited by vrprabhu : 22nd October 2020 at 14:02. Reason: Answered one more question
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Old 22nd October 2020, 21:12   #33
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Re: Federal Bank wants 6 blank cheques for car loan - Now what?

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Originally Posted by blackwasp View Post
Issue them the cheques. Immediately, go to your bank and issue stop payment notice to these. I'm assuming you will issue the cheques from an account in a different bank.
Quote:
Originally Posted by Eddy View Post
What happens if you give such blank cheques, but cancel them at the backend with the bank?
Quote:
Originally Posted by vrprabhu View Post
What you are doing is 'stopping payment' of the cheques i.e. if at all these cheques are presented in future, it will be dishonoured (returned) by the Bank stating that the 'Payment has been stopped by the Drawer (account holder)'.
@blackwsap: This is NOT advisable. Under 138 of the NI Act, a cheque for which you have issued a "stop payment" is equivalent to a cheque bouncing unless you can prove that you did not in fact owe the money in question.

If not, it would be very easy for people who owe money to simply issue a cheque to a recipient and simply issue a stop payment instruction at the back end.

For any reason if in future there is (god forbid) a default in payment and they present a cheque for which you have issued "stop payment" you may get exposed to a 138 proceeding.
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Old 22nd October 2020, 22:44   #34
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Re: Federal Bank wants 6 blank cheques for car loan - Now what?

Quick question, if I have a banking relationship established with the bank already (a savings account for example) do I still need to submit cheques?
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Old 22nd October 2020, 22:57   #35
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Re: Federal Bank wants 6 blank cheques for car loan - Now what?

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Originally Posted by 7000plusrpm View Post
Quick question, if I have a banking relationship established with the bank already (a savings account for example) do I still need to submit cheques?
Generally that does not happen. Extra cheques are needed only if the loan disbursing bank is different from the one where you have the debit account.
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Old 22nd October 2020, 23:02   #36
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Re: Federal Bank wants 6 blank cheques for car loan - Now what?

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Originally Posted by avingodb View Post
Generally that does not happen. Extra cheques are needed only if the loan disbursing bank is different from the one where you have the debit account.
So, I was thinking that this saga of submitting blank cheques can be avoided by opening a savings account with the bank, isn't it?
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Old 23rd October 2020, 09:10   #37
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Re: Federal Bank wants 6 blank cheques for car loan - Now what?

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@blackwsap: This is NOT advisable. Under 138 of the NI Act, a cheque for which you have issued a "stop payment" is equivalent to a cheque bouncing unless you can prove that you did not in fact owe the money in question.
While you are correct, presuming that the loanee has no intention to default, there would never be a valid instance for such security cheques to be presented to the bank. If at all these cheques get presented, and subsequently bounce, then that is precisely the fraud that we are trying to guard against, and can be used as evidence in support of your stand in a legal case.

Moreover, while Section 138 has provisions to punish a defaulter for dishonouring an instrument where such payment was due, it doesn't hold it illegal to dishonour an instrument. This is where the argument hinges, again assuming there is no intention to default or condition that leads to a default.
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Old 23rd October 2020, 09:29   #38
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Re: Federal Bank wants 6 blank cheques for car loan - Now what?

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Originally Posted by roy_libran View Post
While you are correct, presuming that the loanee has no intention to default, there would never be a valid instance for such security cheques to be presented to the bank. If at all these cheques get presented, and subsequently bounce, then that is precisely the fraud that we are trying to guard against, and can be used as evidence in support of your stand in a legal case.

Moreover, while Section 138 has provisions to punish a defaulter for dishonouring an instrument where such payment was due, it doesn't hold it illegal to dishonour an instrument. This is where the argument hinges, again assuming there is no intention to default or condition that leads to a default.
Ever heard of Never say Never my friend. Every borrower does not "intend" to default while taking a loan. What if financial circumstances change one year down the line.

I can argue in multiple ways around some of the legal as well as logical gaps in the post above but the short point is this. Personally, I would not formally hand over a blank signed cheque to a third party if my only basis of doing so is to categorically issue a stop payment at the back end as soon as I issue it. Period!!

But each one to their own risk appetite and approach of course. I would walk away / negotiate away from any transaction that requires me to hand over such a negotiable instrument where my "strategy" is to immediately issue a stop payment at the back end.
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Old 23rd October 2020, 09:35   #39
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Re: Federal Bank wants 6 blank cheques for car loan - Now what?

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Originally Posted by Axe77 View Post
Ever heard of Never say Never my friend. Every borrower does not "intend" to default while taking a loan. What if financial circumstances change one year down the line.
I understand your point and agree. However, the loan market isn't always a buyer's market and not always can you (though one should) walk away from the situation. In such cases, my risk appetite would be to hand over such an illicitly demanded cheque and subsequently cancel it. I can always fight back if needed on the illegality of the arrangement forced upon me by the lender and there are many other means to voluntarily enter into restructuring arrangements. What I would not take a risk on though, is with getting defrauded.
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Old 23rd October 2020, 10:47   #40
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Re: Federal Bank wants 6 blank cheques for car loan - Now what?

When I took the car loan for my duster, I handed over 4 cheques. 3 cheques were of EMI amount with dates on them for first three EMIs along with ECS mandate for deduction from bank account from the fourth month. The 4th cheque was not filled with any amount or date(blank) but had a note that said "Amount not exceeding INR xxxxxx (the amount being the total loan amount). This one cheque is for security purpose. This was explained by representative of the financiers and only after fully understanding the requirements, did I hand over the same.
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Old 23rd October 2020, 10:59   #41
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Re: Federal Bank wants 6 blank cheques for car loan - Now what?

AFAIK, this is legal and asked for in all the banks. I have had two home loans in private and public sector banks. In the Private sector bank, I've been asked to give 6 cheques and public sector banks for 3 cheques issued in the name of the bank.

The argument provided is, in case ECS got failed due to low balance in the account. They use all these cheques for the EMI deduction before going a legal route or declaring the asset as an NPA.
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Old 23rd October 2020, 11:16   #42
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Re: Federal Bank wants 6 blank cheques for car loan - Now what?

Hi. I'm having a problem with my emi payments. Took my car loan from Vijaya bank and everything was going ok until this month. I noticed that no emi/ecs was deducted out of my icici bank account in October. At the same time I get a call from Vijaya bank saying that i owe them an overdue amount of 6000/-. Promptly went to the branch and questioned this. They were very polite and said perhaps due to the bank merger there was a delay but I had to pay this amount. No one knows why! On my loan statement noticed that my loan account number had changed and account migrated to bank of baroda. I left the bank feeling perplexed. Now I am getting calls from them asking to pay 6,000. My emi is double that amount. Can anyone offer some advice on what to do. Thinking of speaking to the bank manager directly today.
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Old 23rd October 2020, 11:24   #43
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Re: Federal Bank wants 6 blank cheques for car loan - Now what?

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Originally Posted by Worldchamp 2019 View Post
Hi. I'm having a problem with my emi payments. Took my car loan from Vijaya bank and everything was going ok until this month. I noticed that no emi/ecs was deducted out of my icici bank account in October. At the same time I get a call from Vijaya bank saying that i owe them an overdue amount of 6000/-. Promptly went to the branch and questioned this. They were very polite and said perhaps due to the bank merger there was a delay but I had to pay this amount. No one knows why! On my loan statement noticed that my loan account number had changed and account migrated to bank of baroda. I left the bank feeling perplexed. Now I am getting calls from them asking to pay 6,000. My emi is double that amount. Can anyone offer some advice on what to do. Thinking of speaking to the bank manager directly today.
There are a few things you can do. First thing should be to issue fresh ECS mandate(the auto debit facility) to the financier. This would need filling new forms, the details should be with financier. The issue might be that loan statement will have new account details but the old details would be in auto debit system which must be throwing errors.
The process may need issuing 3 cheques from new cheque book with updated details.. Hope you resolve issue with urgency as Non payment of a couple of EMIs would affect your CIBIL and further loans in future.
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Old 23rd October 2020, 11:57   #44
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Re: Federal Bank wants 6 blank cheques for car loan - Now what?

My uncle had bought a Honda Activa, with a loan from Muthoot Finance. He was asked to provide a cheque and he did so. During the lockdown, his bank account did not have sufficient balance for the day when the debit was scheduled. Since there was no sufficient amount the lenders showed this cheque thrice in a month although he had paid the loan amount in the Muthoot Office the next day. Subsequently, for every cheque shown at the bank Rs. 500 odd was debited from his bank, Even though the EMI was a mere 2500 odd. I was bamboozled over this and sent a query to the branch manager who replied that even if one EMI has defaulted the lenders can show this cheque for about 10 times and debit the amount. After a confrontation with Muthoot, this practice was stopped and subsequent debits are processed through the bank.
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Old 23rd October 2020, 12:09   #45
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Re: Federal Bank wants 6 blank cheques for car loan - Now what?

Quote:
Originally Posted by 88_TANK_88 View Post
There are a few things you can do. First thing should be to issue fresh ECS mandate(the auto debit facility) to the financier. This would need filling new forms, the details should be with financier. The issue might be that loan statement will have new account details but the old details would be in auto debit system which must be throwing errors.
The process may need issuing 3 cheques from new cheque book with updated details.. Hope you resolve issue with urgency as Non payment of a couple of EMIs would affect your CIBIL and further loans in future.
Great, thanks so much. I'll go to the bank today and sort this out. They should be doing all this without me having to run from pillar to post. But anyhoo needs must. Thanks again.
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