Banking · Banking Regulations and NI Act
What is the primary legal reason the RBI prohibits banks from crediting 'account payee' cheques into any account other than that of the named payee?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1To increase the profitability of banks by enforcing stricter cheque transaction regulations and minimizing the risk of financial losses.
- 2To encourage the use of electronic payment methods, thereby reducing the dependency on physical cheques and simplifying banking operations.
- 3To comply with legal duties under the Negotiable Instruments Act, 1881, protecting banks from liability for conversion of unauthorized collections.✓
- 4To align with the Reserve Bank of India's new digital transaction policies aimed at enhancing online banking security.
Correct answer
To comply with legal duties under the Negotiable Instruments Act, 1881, protecting banks from liability for conversion of unauthorized collections.
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