A cheque bounces when a bank cannot pay the amount written on it. The most common reason is simple: there is not enough money in the issuer’s account.
In Nepal, a bounced cheque is not always just a banking inconvenience. If a cheque is dishonoured because of insufficient funds and the proper legal process is followed, the person who issued it can face a complaint, repayment demand, and even a penalty.
What is a cheque bounce?
A cheque bounce also called a returned or dishonoured cheque happens when the bank refuses or is unable to make payment to the person presenting it.
For instance, if someone writes a cheque for NPR 50,000 but has only NPR 20,000 in their account, the bank cannot honour the full amount. The cheque is returned unpaid.
But not every returned cheque leads to criminal liability. A cheque may be returned for technical reasons, while Nepal’s current cheque-dishonour offence mainly applies when there are insufficient funds and the bank has completed the required certification process.
Why cheques get returned
There are different reasons for the return of a cheque:
- Not sufficient balance: There is no sufficient money in the bank account.
- Unmatched signatures: The signatures do not match with the bank’s record.
- Faulty data: If the data on the check are incorrect, such as the date, payee name, the amount in words or figures or any other relevant detail.
- Invalid cheque: The cheque has expired and has crossed its validity date.
- Frozen account: The account from which the cheque is issued cannot make payments.
In Nepal, the legal consequences are mainly related to cheques dishonoured due to insufficient funds.
Cheque Bounce Law in Nepal
Cheque bounce cases involving insufficient funds are now governed by the Banking Offence and Punishment Act, 2064, as amended by the Banking Offence and Punishment (Second Amendment) Act, 2082.
The amendment, authenticated on 24 Baisakh 2082 (6 May 2025), added Section 3A. It created a clearer process for certifying cheque dishonour and set out the penalties that can follow.
Earlier, cheque bounce matters were also dealt with under Section 107A of the Negotiable Instruments Act, 2034. That provision was repealed through the 2082 amendment, although transitional arrangements apply to cases already underway.
What changed under the new law?
The amendment introduced a more structured process:
- The bank allows the cheque issuer 45 days for providing adequate funds.
- If the payment is still not made the bank may formally certify the cheque as dishonored.
- The cheque holder may then lodge a complaint, usually within a year of certification.
- On conviction, the issuer may face imprisonment based on the cheque amount.
- The issuer may also have to repay the amount, pay interest and bear a 5% penalty.
- Eligible cases may be settled if both sides agree and follow the legal procedure.
What happens after a cheque bounces?
Cheque is presented or deposited to the bank.
The bank finds insufficient funds. The cheque cannot be paid and is returned.
A request for certification of dishonour is made. Requests can be made to the concerned bank for the process of certification to be followed.
Notice is sent to the issuer which then has a maximum period of 45 days to deposit the amount.
Cheque is presented again. In case there are funds available within the given period, the cheque can be paid.
The process of certification is followed. In case of dishonour of the cheque due to insufficient funds, the bank issues the certificate of dishonour within 3 days of re-presentation.
After certification, the complainant can move ahead with the complaint using the certificate and other documentary proof.
Penalties for cheque bounce
If the offence is established, the punishment depends on the value of the dishonoured cheque.
| Cheque Amount | Imprisonment |
| Up to NPR 15 lakh | Up to 1 month |
| Above NPR 15 lakh to NPR 50 lakh | 1 to 3 months |
| Above NPR 50 lakh to NPR 1 crore | 3 months to 1 year |
| Above NPR 1 crore to NPR 10 crore | 1 to 2 years |
| Above NPR 10 crore | 2 to 4 years |
Along with imprisonment, the issuer may be required to:
- Repay the cheque amount.
- Pay interest from the date the cheque was issued until actual recovery.
- Pay a penalty equal to 5% of the dishonoured amount.
For example, if a NPR 500,000 cheque is dishonoured and the offence is proved, the 5% penalty would be NPR 25,000 separate from repayment, interest and any imprisonment imposed by the court.
How to file a complaint
If you received a bounced cheque and the issuer has not paid, keep the original cheque and all bank documents. Request formal dishonour certification from the bank, collect payment records and communications, and file a complaint with the police within one year of certification.
After the complaint, the police investigate. The government prosecutor may then file the case before the concerned District Court. The court is expected to proceed with the case within six months of the complaint.
What should you do If a Cheque Bounces?
If you received a bounced cheque:
- Contact the issuer and ask for payment.
- Keep the original cheque and all bank records.
- Confirm why the cheque was returned.
- Request formal dishonour certification if payment is not made.
- Act within the one-year complaint deadline.
If you issued a bounced cheque:
- Check your account balance immediately.
- Arrange funds and try to settle the payment quickly.
- Respond to any bank notice without delay.
- Speak with the cheque holder if possible.
- Get legal advice if a complaint has been filed or certification has begun.
How to avoid the problem
The simplest protection is to issue a cheque only when you are sure the money is available. Keep a buffer in your account, check the cheque details carefully, avoid relying on deposits that have not yet arrived, and inform the recipient early if a payment may be delayed.
Legal note: This is general information based on Nepal’s Banking Offence and Punishment Act, 2064, as amended in 2082, and related Nepal Rastra Bank directives. It is not legal advice. For an actual dispute, consult to respective representatives.
