A Guide to Positive Payment System


The growth in financial technology seen this century has brought about a massive change in the way customers handle transactions with money. Spending and receiving money has become easier through modes such as bank transfers, national electronic fund transfers (NEFT), internet banking and cheque transfers.

Banking processes have become more efficient and convenient, both for customers as well as lenders. But along with these developments have come fraudsters who have found loopholes in the system.

The security of a client's hard-earned money is a prime goal for every bank. Here is a look at how banks ensure funds are transferred exactly where customers want them to go.


What is a Positive Pay System?

A positive pay system (PPS) is one developed by a bank to ensure that a cheque issued by an account holder is transferred correctly. This process includes reconfirming cheque details with receiving banks for cheques of large values and is done online.

The drawer of the cheque will be required to reconfirm certain key details about the cheque, such as the date, name of the payee and amount, with the collecting bank. This makes it easier for the PPS to confirm the transfer without having to directly contact the customer.


What is a Cheque Truncation System?

The CTS or cheque truncation system is an online cheque-clearing system that uses images of the cheque as well as magnetic ink character recognition (MICR) to clear cheques without actually moving the cheque at all.

The images and MICR are sent to the collecting bank, which then verifies the information and completes the transaction.


Features of the PPS

  • The decision to use the system is completely up to the drawer of the cheque.
  • If the drawer chooses to use the PPS, they will have to supply the details for all cheques over the amount of Rs. 50,000.
  • Using the PPS is mandatory for all cheques above the limit of Rs. 5 lakhs even if the drawer has not chosen to do so.
  • Not using the PPS when necessary may lead to the rejection of the cheque by the CTS.
  • If the details submitted through the PPS do not match the details received by the collecting bank, the CTS may reject the cheque.
  • The PPS makes the clearing process much quicker as well as safer.

At Federal Bank, submitting the details required for the PPS may be done through FedNet, Corporate FedNet and the Fed-e-point self-service portals. Our AI-based virtual assistant Feddy is also available 24/7 to help customers with every step of the process.


Final Word

The PPS or positive pay system is an electronic system put in place for confirming a cheque's details before it is cleared. Details such as the date, amount being transferred and name of the payee will need to be submitted to the CTS of the collecting bank. This information will need to be entered before submitting the cheque for clearance.

The PPS takes away any possibility of human error and adds a level of security to huge financial transactions. Hence, clients can remain assured of a smooth, safe and efficient banking experience. Visit the Federal Bank website today to explore the various services we provide.