Section 5(b) of the Banking regulation act of India defines “Banking” as follows:

(b) “banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise; 

It is inherent in the definition that ability for “withdrawal by means of cheques” is an integral part of the definition. If this is not there, a business cannot be called “Banking business”. If any Bank therefore takes a principled stand that it does not want its customers to use cheques then it means that it is withdrawing from Banking business.

The license granted to such a Bank should therefore be considered as invalid. 

Now RBI which is the licensing authority and the Banking regulator in India is itself taking a principled stand that Banks should stop allowing withdrawal of funds by cheques and is not indicating that the banking license would be cancelled.

This policy is contained in the “Discussion paper on disncentivisation in the use of cheques” released by RBI in which several suggestions are being made on how to disincentivise the use of cheques.

The discussion paper is akin to a paper on “How to create a Bomb and destroy India” issued by the Parliament itself.

RBI has no legal right to talk of any plan to “Disincentivise” use of cheques since this hits at the root of the Banking definition.

I demand that RBI should immediately withdraw the discussion paper and stop talking of “Disincentivisation of Cheque” any time in the future.

 I request the Finance Minister to take suitable action to ensure that the suggestions are immediately withdrawn.


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