Section 25 of PSSA : Section 25: Dishonour Of Electronic Funds Transfer For Insufficiency, Etc, Of Funds In The Account

Explanation using Example

Imagine John tries to pay his electricity bill through an online banking transfer. He initiates a transfer of INR 5,000 from his bank account to the electricity company. Unfortunately, John's account has only INR 2,000, which is insufficient to cover the transfer. The bank, therefore, does not process the transaction and informs the electricity company that the transaction has been dishonoured due to insufficient funds.

The electricity company then sends a written notice to John within 30 days, demanding the payment. John receives the notice but fails to deposit sufficient funds and pay the electricity company within the subsequent 15 days. Under Section 25 of The Payment and Settlement Systems Act, 2007, John has committed an offence because he initiated an electronic funds transfer without having sufficient funds, which was intended to discharge a debt, and he did not rectify the situation within the stipulated time after being notified.

As a result, John could face legal action, where the court would presume the dishonour of the transfer and could potentially punish him with imprisonment, a fine, or both, as per the provisions of the Act.