What happens if a cheque bounces

When a cheque bounces, it is dishonoured by the bank, leading to several consequences for both the drawer and the payee:

• Financial Penalties: Banks typically charge a non-sufficient funds (NSF) fee to both parties.
• Legal Action: Under Section 138 of the Negotiable Instruments Act, 1881, issuing a cheque without sufficient funds is a criminal offence in India, punishable by up to two years of imprisonment or a fine up to twice the cheque amount.
• Credit Impact: Frequent bounces can negatively affect your credit score and banking reputation.