A dishonoured cheque meaning is a cheque your bank refuses to pay when it is presented for payment, most often because your account does not have enough balance to cover it. The bank marks it “returned” instead of “cleared” and issues a cheque return memo stating the reason. Both the person who wrote the cheque and the person who deposited it are charged a return fee by their respective banks, and repeated dishonour for insufficient funds carries criminal liability under the Negotiable Instruments Act, 1881.
What Does “Cheque Dishonoured” Mean?
A dishonoured cheque, sometimes searched as a “check dishonoured” in US-style spelling, is a cheque that a bank declines to honour at the clearing stage instead of transferring the funds to the payee. The bank returns it through the clearing system with a specific reason code, such as “funds insufficient” or “signature differs,” printed on a cheque return memo. For example, if you write a cheque for Rs. 50,000 but your account balance is Rs. 38,000, the cheque bounces and your bank charges you a return fee on top of the embarrassment.
Why Do Cheques Get Dishonoured? Common Reasons
Banks return cheques under two broad categories: financial reasons and technical reasons. The distinction matters because the charge for each is different, and only financial reasons trigger Section 138 liability.
Financial reasons
- Insufficient balance in the drawer’s account on the day of presentation
- Balance exceeds the arrangement (overdraft or cash credit limit crossed)
- Account frozen, closed, or under a garnishee order
Technical reasons
- Signature mismatch with the bank’s specimen signature
- Amount in words does not match the amount in figures
- Overwriting, alteration, or a cutting on the cheque without authentication
- Post-dated cheque presented before its date, or a stale cheque presented more than three months after the date printed on it
- Missing or incorrect MICR/IFSC details
- Stop payment instruction placed by the drawer before presentation
Cheque Return Charges: What Your Bank Actually Deducts
Cheque return charges, also called bounce charges, are levied on both sides of a dishonoured cheque, and most people only notice the one deducted from their own account. Banks call the fee charged to the person who wrote the cheque an “inward return” charge, and the fee charged to the person who deposited it an “outward return” charge. GST at 18% applies on top of every figure below unless the bank states otherwise.
| Bank | Inward return (cheque you issued bounced, insufficient funds) | Outward return (cheque you deposited bounced) | Technical-reason return |
|---|---|---|---|
| SBI | Rs. 500 + GST, flat, irrespective of amount | Rs. 150 + GST (up to Rs. 1 lakh); Rs. 250 + GST (above Rs. 1 lakh) | Rs. 150 + GST |
| HDFC Bank | Rs. 450 (1st in a month), Rs. 500 (2nd), Rs. 550 (3rd onward); Rs. 350 for a funds-transfer cheque return | Rs. 200 + GST, flat | Rs. 50 + GST |
| ICICI Bank | Rs. 500 + GST | Rs. 200 + GST | Rs. 50 + GST (except signature mismatch) |
A cheque dishonoured charge is deducted automatically from your account; you will not receive a separate bill for it. Senior citizens get a discounted rate at some banks (HDFC, for instance, charges Rs. 400/450/500 instead of Rs. 450/500/550 for the same three-tier structure). Bank-specific figures change periodically, so treat the table above as a working reference and confirm the current schedule on your bank’s official fees-and-charges page before relying on it for a dispute or a client communication.
Read more: Cheque Leaf Meaning
Section 138 of the Negotiable Instruments Act: The Legal Consequence
Section 138 of the Negotiable Instruments Act, 1881, makes it a criminal offence to issue a cheque that bounces for insufficient funds, but only when the cheque was issued to discharge a legally enforceable debt or liability. A cheque given as a gift, for example, does not attract Section 138 even if it bounces.
The process runs on strict timelines:
- The payee must send a written demand notice to the drawer within 30 days of receiving the cheque return memo, asking for payment.
- The drawer gets 15 days from receipt of that notice to pay the cheque amount.
- If payment is not made within those 15 days, the payee can file a criminal complaint in court within one month of the day the 15-day period expired.
- On conviction, the drawer faces imprisonment of up to two years, a fine that can go up to twice the cheque amount, or both.
Section 138 of the NI Act, along with the rest of Chapter XVII of that Act, was not touched by the Bharatiya Nyaya Sanhita or the Bharatiya Nagarik Suraksha Sanhita that replaced the IPC and CrPC in 2023, so this notice-and-15-day framework continues to apply as it stood before those reforms. Section 147 of the same Act allows the offence to be compounded, meaning both parties can settle at any stage, including after a complaint has already been filed in court.
Does a Dishonoured Cheque Affect Your CIBIL Score?
A single cheque bounce, on its own, does not directly lower your CIBIL score, because credit bureaus track loan and credit card repayment behaviour, not every cheque transaction on a savings account. The score is affected when the bounced cheque was specifically an EMI or loan repayment instrument. In that case, the lender reports the missed payment to the bureau as a delayed or defaulted instalment, and that entry does pull the score down. If you have issued post-dated cheques for a loan, treat each one with the same balance discipline you would apply to an auto-debit mandate.
How to Avoid a Cheque Dishonour
- Keep a buffer above the cheque amount in your account, since other auto-debits can clear on the same day and drop your balance below what you expect.
- Match your signature exactly to the specimen your bank holds on file; a tired or rushed signature is a common technical bounce.
- Write the amount in words and figures so they match precisely, and avoid overwriting; if you make an error, tear up the cheque and write a fresh one.
- Track the validity window; a cheque is stale three months after its date and will be returned if presented after that.
- Before issuing a large cheque against a joint or business account, confirm the current balance rather than relying on your last statement.
What Experts Say
Practitioners who deal with cheque returns regularly point out that the bank-side charge is the smaller problem; the real cost is the 45-to-60-day runway a Section 138 notice-and-complaint cycle takes to even reach court, plus legal fees that routinely exceed the cheque amount for smaller-value disputes. The recurring advice is to resolve a bounce directly with the payee inside the 15-day notice window wherever possible, since compounding the offence early under Section 147 is far cheaper than litigating it, and courts increasingly expect parties to attempt settlement before a full trial.
Frequently Asked Questions
What does a dishonoured cheque mean? A dishonoured cheque is one that a bank refuses to pay when presented, usually because the account does not hold enough balance, and the bank returns it through the clearing system with a reason code instead of transferring the funds.
What are cheque return charges? Cheque return charges are the fees banks deduct when a cheque bounces. The drawer’s bank charges an inward return fee (commonly Rs. 450 to Rs. 550 plus GST for insufficient funds), and the payee’s bank charges a smaller outward return fee (commonly Rs. 150 to Rs. 250 plus GST) on the same bounced instrument.
What are bounce charges on a bank account? Bounce charges are another name for cheque return charges, the penalty a bank levies when a cheque, ECS mandate, or NACH debit is returned unpaid. They range from roughly Rs. 150 to Rs. 550 plus GST depending on the bank and whether the return is for financial or technical reasons.
What does “check dishonoured” mean? “Check dishonoured” is the American spelling of “cheque dishonoured” and means the same thing: a cheque that a bank has declined to honour and returned unpaid, typically for insufficient funds or a signature or amount mismatch.
Is cheque dishonour a criminal offence in India? Yes, when a cheque issued for a legally enforceable debt bounces due to insufficient funds, Section 138 of the Negotiable Instruments Act, 1881, makes it a criminal offence punishable with imprisonment up to two years, a fine up to twice the cheque amount, or both, after the drawer fails to pay within 15 days of receiving a legal notice.
Can a cheque bounce case be settled outside court? Yes, Section 147 of the Negotiable Instruments Act allows a cheque dishonour case to be compounded, meaning the drawer and payee can settle the matter at any stage, including after a criminal complaint has been filed, and the case gets disposed of once both sides agree.