Most Banks ask customer to give 3-5 cheques which are either postdated and with hefty amount.
The customer is told that as loans are paid back via ecs so its imp to take these cheque as a part of security.
The practice is true as if a customer doesn’t pay, the bank has to put that cheque and then file a report as per Indian law.
Now to check whether you are giving the right set of cheques and they aren’t misused, do the following
- All cheques must be ac payee.
- Cheques should be given in name of bank with ref to loan account.
- One should get a photocopy of these cheques and preserve these copies for your records.
- Once the loan is over, one should get these cheques back.
The Bombay High Court has held that if a blank post-dated cheque — which has been issued only as a “collateral security” for a loan — bounces, the debtor can not be prosecuted under the Negotiable Instruments (NI) Act.
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