The Presidents / Chief Executives

All Banks / DFIs

Dear Sir / Madam,

Dishonoring of Cheques

1. Please refer to BPD Circular Letter No. 22 dated June 14, 2005 regarding the above subject.
2. It has been observed that some banks are not exercising due care in recording complete and correct reasons for dishonoring cheques. Some banks return unpaid cheques with the remarks of “insufficient funds” even when actual reasons of dishonor or defects in the instruments are different. Since dishonoring 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.
3. The foregoing practice on the part of some banks has been seriously viewed by the State Bank. Banks are, therefore, strictly advised to record correct and complete reasons for dishonoring cheques failing which State Bank will take punitive action under relevant provisions of law.
4. Please acknowledge receipt.