Cheque Bounce Charges: Fees, Penalties & How to Avoid Them
14 Sep, 2026
By Online Legal India
Published On 14 Sep 2026
Category Other
A cheque bounce occurs when a bank returns a cheque unpaid due to insufficient funds, signature mismatch, incorrect details, or technical issues. Depending on the circumstances, a bounced cheque may also have financial and legal implications. In simple words, if you are the issuer of the cheque, you may face legal consequences if the statutory conditions under Section 138 are satisfied and the payment is not made within the prescribed period. Since there might be a lot of reasons behind a cheque bounce, it’s always better to stay aware of the causes, charges, implications, and preventive measures to avoid cheque bounce charges and legal consequences. So, without further delay, let’s get deeper into it in today’s blog.
Honestly, there might be a lot of reasons behind a bounced cheque. However, below we have mentioned some of the most common reasons.
The bank account does not have enough money to pay the amount written on the cheque.
If the signature on the paper does not match the saved signature at the bank, the cheque may bounce.
Any of the factors mentioned below may lead to a bounced cheque:
If the bank account is closed, frozen, or stopped by the owner or the bank, a cheque may bounce.
Due to one of the reasons, a cheque may also bounce:
The cheque is presented after its applicable validity period, which is generally three months from the date of the cheque.
Apart from all these reasons mentioned below, a torn or damaged cheque may also be one of the prime reasons leading to a bounced cheque.
Cheque bounce charges are fees levied by banks when a cheque is returned unpaid. The applicable amount varies depending on the bank, account type, reason for the return, and other applicable policies. Dishonour of a cheque may, where the statutory conditions are satisfied, lead to proceedings under Section 138 of the Negotiable Instruments Act, 1881.
Inward cheque return charges may apply to the presenting customers, depending on the bank’s applicable charges and the reason for return.
Outward cheque return charges may be levied on the account holder who issued the bounced cheque. The applicable fee varies widely depending on the bank, account type, reason for return, and whether there have been repeated instances.
These charges may vary depending on the bank and the number of bounces. Usually, different banking institutions charge differently for inward and outward returns, excluding the applicable GST.
In a nutshell, cheque bounce charges cover administrative costs, discourage issuers from writing cheques without maintaining sufficient funds, protect payees from financial distress, and enforce accountability.
The amount of cheque bounce charges may vary based on several factors. Here are the 6 key factors that may determine the applicable charges:
The presenting customer may be charged a return-processing fee, depending on the bank’s applicable fee structure and the reason for return.
The banking institution may charge higher penalties for outward bounces if you issued a cheque to someone else that bounced due to non-maintenence/lack of funds in your account.
If a cheque is returned due to a technical issue such as signature mismatch, incorrect date, or overwriting, the bank may apply charges according to its applicable fee structure.
Note: Certain account types may have different cheque return fee structures or waiver provisions, depending on the bank's applicable terms and conditions.
This is one of the most crucial determinants of the cheque bounce charges applicable. For example, the banking/finance institution charges a baseline penalty fee for the first offence. However, charges for repeated cheque returns may vary according to the bank’s applicable fee structure and account terms. Repeated cheque returns may result in higher charges or other consequences depending on the bank's policies and applicable regulations.
Cheque return charges may vary across banks and may differ based on the bank's prevailing fee schedule, account type, and reason for the cheque return. Applicable taxes may also be added to the base charge.
Bouncing due to insufficient funds or exceeding the agreed arrangement may attract Section 138 consequences if the statutory conditions are satisfied.
Once a cheque is returned unpaid, the bank issues a return memo stating the reason for the dishonour. The next steps depend on whether you are the cheque issuer or the payee.
Applicable cheque-return charges may be levied by the respective banks according to their fee structures and the circumstances of the return.
The payee may re-present the cheque during its validity period, subject to the applicable banking rules. However, if the cheque is presented again and is returned unpaid, additional bank charges may apply.
Where the conditions under Section 138 of the Negotiable Instruments Act, 1881, are met, the payee may issue a written demand notice to the drawer within the prescribed statutory period after receiving the bank's return memo. Next, the issuer gets 15 days from the date of receiving the notice to pay the full amount.
But if the drawer fails to make payment within 15 days of receiving the notice, the payee may file a complaint under Section 138 within one month from the date on which the cause of action arises.
Now, let’s discuss the two most crucial topics here. What should you do if you issue a cheque to someone else and it bounces? Or you receive a cheque that bounces? That’s exactly what we will discuss in this section.
If you issued the cheque, first confirm the reason for the return with your bank and take prompt steps to resolve the outstanding payment.
Note: It is important to remember here (as we said before) that your bank will charge you a penalty fee for a bounced payment, and if it was due to a lack of funds in your account, the payee may send you a formal legal notice.
Once a valid statutory notice is issued under Section 138, you generally have 15 days from receipt of the notice to make the payment. Failure to pay within this period may allow the payee to initiate further legal proceedings, subject to the statutory conditions and timelines.
If you are the payee, you should promptly obtain the bank's return memo, communicate with the drawer, and consider the appropriate legal remedy if the outstanding payment remains unpaid.
However, despite requesting payment for the second time, if the issuer does not pay, you may connect with a lawyer and send a statutory demand notice within 30 days of receiving information from the bank regarding the cheque’s return unpaid. If the drawer fails to make payment within 15 days of receiving the notice, the payee may file a complaint within one month from the date on which the cause of action arises.
If a cheque dishonour attracts liability under Section 138 of the Negotiable Instruments Act, 1881, the issuer may face imprisonment of up to two years, a fine of up to twice the cheque amount, or both, subject to the court's decision.
Below, we have listed the commonly applicable penalties:
However, the offence is compoundable under Section 147 of the Negotiable Instruments Act, 1881.
Section 138 applies only when specific statutory conditions are satisfied, including the nature of the underlying liability, presentation of the cheque, issuance of the demand notice, and failure to make payment within the prescribed period. Below are the circumstances when Section 138 applies:
If you have received a cheque that has been returned unpaid, you may need to issue a statutory demand notice when the requirements of Section 138 are satisfied. The following steps outline the general process.
Now, coming to the second stage!
What if you don’t receive the payment within the next 15 days of sending the formal notice to the issuer?
Well, in that case, you may go ahead and file a criminal complaint in a Magistrate’s Court under Section 138 of the Negotiable Instruments Act within one month from the date on which the cause of action arises.
If found guilty by the Court, the issuer may be imprisoned for up to two years, may be liable to pay a fine up to twice the cheque amount, or may be liable to face both consequences.
The total financial impact of a cheque bounce may extend beyond the bank's return charge. Depending on the circumstances, it may include legal notice expenses, professional fees, court-related costs, and other applicable charges.
The issuer’s bank may charge a fee per bounce due to insufficient funds, with higher charges possible for repeated bounces in the same month, while technical errors such as signature mismatch may attract a different amount of penalty charges. However, the payee’s bank may also charge a specific fee for processing the returned or unpaid cheque (which may vary).
Legal notice and professional fees vary depending on the advocate, location, complexity of the matter, and services involved. Court-related fees, where applicable, may also vary based on the state and nature of the proceedings.
Given the potential financial and legal implications of a cheque bounce, taking preventive measures can help minimise the risk of returned cheques and additional charges.
Below, we have discussed a few preventive measures to take if you want to avoid cheque bounce charges.
RBI periodically updates the cheque-clearing framework and related banking procedures. That is why customers should check the latest RBI notifications and their bank's current terms for applicable cheque-processing timelines, return procedures and charges.
So, if you are the cheque issuer, always make sure you maintain sufficient funds in your account and, where your bank provides Positive Pay, consider submitting the required cheque details electronically for applicable cheques. However, if you have received a cheque that bounced, you may pursue the applicable legal remedy and, where applicable, seek interim compensation under Section 143A.
Disclaimer: Fees & charges are subject to change as per regulatory directives and the bank's discretion.
Ans: A cheque bounce does not directly influence your CIBIL score because credit bureaus do not track regular bank account transactions or individual cheque clearances. However, it may indirectly harm your score if the bounced cheque was meant to pay a loan EMI or a credit card bill.
Ans: Both the issuer and the payee may initially have to pay charges to their respective banks when a cheque bounces. (Applicable bank charges depend on the respective banks’ fee structures.) However, legal consequences may arise for the drawer where the statutory conditions under Section 138 are satisfied.
Ans: Yes, a cheque may generally be re-presented while it remains valid, subject to applicable banking rules and the circumstances of the dishonour.
Ans: No, a cheque bounce is not automatically considered a criminal offence under Section 138. It applies when its statutory conditions are satisfied, including a legally enforceable debt or liability, applicable dishonour, timely notice, and failure to make payment within 15 days of receiving the notice.
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