To mitigate the risk of money laundering and terror funding, the Reserve Bank of India (RBI) has asked banks not to pay more than Rs 50,000 in cash to customers holding at-par cheques.
Regional rural banks and cooperative banks are advised to utilize the at-par cheque facility only for their own use and payment of cash should not exceed Rs 50,000, the RBI said in a notification on Tuesday.
All transactions of Rs 50,000 or more should strictly be by debit to the customer's account, it said.
These banks are advised to make use of more efficient means of remittances for customers like NEFT or RTGS by providing such services directly or by becoming sub-members of banks providing such services, it added.
Banks should also ensure that all at-par cheques issued by them are crossed 'account payee' irrespective of the amount.
In a separate notification, banks have been advised to carry out detailed due diligence while entering into correspondent banking arrangements, including information on the other bank's management, major business activities and the identity of third-party entities that will use the correspondent banking services.
The apex bank said it has been observed that some commercial banks have arrangements with co-operative banks, which open current accounts with the commercial banks and use the cheque book facility to issue at-par cheques to their constituents and walk-in-customers for facilitating their remittances and payments, it said.
Since the at-par facility offered by commercial banks to co-operative banks is in the nature of correspondent banking arrangements, banks should monitor and review them to assess the risks, including credit risk and reputational risk arising therefrom, it said.
For this purpose, it said, banks should retain the right to verify records maintained by the client cooperative banks and societies for compliance with the extant instructions on KYC and AML under such arrangements.
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