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| 1. What happens if I issue a cheque and my account does not have sufficient funds? |
When a cheque is issued with insufficient funds in the account, the customer runs the risk that the cheque may not be honoured. For a cheque that is dishonoured due to insufficient funds, there are two types of fees imposed by banks. Firstly, a handling/ administrative fee is charged for the return of the cheque, and secondly, a charge is imposed for incidental overdraft (“OD”) interest. The second charge of incidental OD interest is to cover the bank’s loss in overnight interest. When a cheque is drawn on a bank (“payer’s bank”) and deposited at another bank (“payee’s bank”), the payee’s bank would have to send the cheque for clearing to claim the proceeds of the cheque from the payer’s bank. Under the cheque clearing system in Singapore, the payer’s bank will pay the proceeds of the cheque to the payee’s bank on the day the cheque is cleared and the account of the payer will be debited on the same day. If the account has insufficient funds, the bank may not honour the cheque. The decision to honour or return the cheque is made on the next business day. Hence, if the bank decides to return the cheque, the reversal entry, that is, the credit back to the payer's account, will be valued the next business day. Thus, the payer's account will show an overdraft on the day the cheque was cleared because the reversal entry is made only on the next business day. The amount of the cheque has been funded by the paying bank on the day the cheque was cleared and the bank was therefore “out of pocket” when there were insufficient funds in the payer’s account. An overnight incidental OD interest charge is thus imposed on the overdrawn balance in the account. Notwithstanding that the payer may not have a pre-arranged OD facility, his account will automatically go into an overdraft position due to insufficient funds. The banks’ standard Terms and Conditions do provide for them to levy the necessary interest charges if the account goes into an overdraft position due to insufficient funds. We understand that banks in Hong Kong and Malaysia similarly levy the two charges for returned cheques due to insufficient funds. Finally, customers are advised to monitor their accounts regularly and to issue cheques only when there are sufficient funds in their accounts, in order to avoid incurring bank charges and incidental OD interest. |
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| 2. Can I encash a cheque at a branch of the bank other than the one which issued the cheque? |
Many retail banks in Singapore do allow customers to encash cheques at branches other than at the home branch of the account holder, although for control reasons, limits could be placed on the amount to be withdrawn. However, there are a few banks that do not allow encashment other than at the home branch as they do not have a customers' signatures on-line verification system. |
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| 3. Are there any safeguards which recipients of cheques can take against the cheques being subsequently dishonoured? |
It is the general practice for the party accepting personal cheques to sight the identity card of the payer and record his personal particulars, including address and telephone number. Businessmen should know that personal cheques can bounce due to various reasons and if they accept personal cheques, then they must know that they are accepting the risks attached. Any business, as a matter of prudence, should conduct its own credit assessment of the parties it deals with before entering into a business transaction and agreeing on the mode of payment. Banker's cheques or cashier's orders are available to those who need assurance that payment would be honoured. |
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| 4. What is the banking practice relating to cheques that are not crossed, with the payee's name/NRIC number indicated and the word "bearer" cancelled? |
As a general rule, if the word "bearer" is deleted and the cheque is not crossed, banks would allow only the named payee to obtain cash for the cheque. |
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| The Cheque Truncation System (CTS) is an online image-based cheque clearing system implemented on 12 July 2003. |
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| 1. Are all banks in Singapore on CTS? |
All banks that issue SGD cheques and local USD cheques are on CTS. |
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| 2. What should I do if I receive a non CTS-compliant cheque? |
You should ask for a new CTS-compliant cheque from the drawer. |
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| 3. Under CTS, can I alter a cheque? |
Yes, provided you endorse the alterations with your full signature. |
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| 1. What is an IRD? |
Under CTS, when a cheque that you have deposited into your account is returned unpaid, you will receive an IRD instead of the cheque. The IRD serves as a notice of dishonour and replaces the original cheque for the purpose of re-presentment for clearing under CTS. It is a legally recognized replacement of the original cheque for re-presentment. Here is a specimen IRD showing the features to look out for.  |
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| 2. Why can't the banks return the original unpaid cheque? |
As CTS uses electronic images, the physical cheque is removed from the clearance process once you present it at your bank. |
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| 3. Wil banks impose a charge for the issuance of IRDs? |
Other than returned cheque charges, there are no additional charges levied for the issuance of IRDs. However, a retrieval charge of $50 may apply if you want to the original cheque returned -- provided that the cheque is still in the bank’s warehouse. |
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| 4. What are the IRD's security features? |
Each IRD is serialized and printed on CTS watermark paper as well as controlled strictly by the participating banks. |
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| 5. What should I do if I receive an IRD? |
You should look at the bottom half of the IRD to determine the reason why the cheque is unpaid as well as whether you can present the IRD to the bank. |
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| 6. What must I do if I can present the IRD to the bank for clearing? |
You detach the IRD from the Return Cheque Advice and deposit it at any branch of the same bank that you first deposited the cheque. |
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| 7. What should I do if I cannot present the IRD to the bank for clearing? |
You should exchange the IRD for a new cheque from the drawer. |
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| 8. Is it permitted to make alterations on the IRD eg. have the drawer sign on it if the cheque was unpaid because of missing or irregular signature? |
Alterations are not allowed on IRDs as any changes will not correspond to the scanned image of the original cheque held by the Presenting Bank. You should ask the drawer to give you a fresh cheque. |
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| 9. Can I present a torn or mutilated IRD? |
No. You should ask the drawer for a new cheque. |
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| 10. What should I do if I have misplaced or lost an IRD that can be presented? |
As an IRD is a substitute of the dishonoured cheque, you should treat a misplaced or lost IRD as if it were a lost cheque. You should ask the drawer for a new cheque. The drawer should also put a stop payment instruction on the lost IRD. |
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| 11. If an IRD is presented and returned, will the same IRD be used again? |
No. A new IRD will be generated for each return of the same cheque. Hence, if an IRD is presented and subsequently returned, another IRD will be generated stating clearly that it is the Second IRD. |
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| 12. What are the benefits of the IRD over the old return cheque process? |
You will be able to read in a one-page document: the return reason whether it can be presented whether you should obtain a new cheque from the drawer the validity period of the IRD and the number of times the IRD has been presented
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| The 5-Day Clearing Week (5DCW) means that on Saturdays, there will be no crediting or debiting of customer accounts with cheques, GIRO or Interbank funds transfers. Therefore, clearing of funds will be from Mondays – Fridays only. This changeover took effect from 15 May 2006. |
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| What does it mean for cheque clearing and banking transactions on Saturdays under 5DCW? |
| (A) Cheques: | | Thursday (before cutoff time) | Friday (after 2pm) | | Thursday (after cutoff time) | Monday (after 2pm) | | Friday (before cutoff time) | Monday (after 2pm) | | Friday (after cutoff time) | Tuesday (after 2pm) | | Saturday | Tuesday (after 2pm) |
| | | | (B) Banks with branch banking on Saturdays: | | Cheques will be accepted for deposit but funds will be made available only on Tuesdays after 2pm. Cash cheques can be en-cashed at the drawer’s bank. Cheques for deposit into an account may be marked and drawn on, provided both the payee and the drawer are from the same bank. (A handling fee will be charged for this). | | | | (C) GIRO/ Standing Instruction: | | No crediting or debiting of customer accounts on Saturdays via GIRO. | | | | (D) Electronic Banking Services (eg ATM, Internet Banking and Phone Banking): | | Customers can transfer funds from one account to another account within the same bank 24/7. |
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