Cash, cheques and cards

Detail

1. Getting cash from your bank

At the branch

• Fill in a withdrawal slip. This is a small bank form that shows your account number, the amount and your signature.
• Hand it in at the cash counter and collect the cash.
• Drawback: you can only do this during banking hours, and you must go to your own branch.

At an ATM

• An Automated Teller Machine (ATM) is a self-service "mini-bank". It is open 24×7.
• You find ATMs at bus depots, markets, railway stations, airports and malls.
• Steps: insert your debit card → type your PIN → enter the amount → collect the cash.
• A Personal Identification Number (PIN) is a secret number of 4–6 digits. It proves that you are the real card owner for ATM, card and other money transactions.

National Financial Switch (NFS)

• What it is: a network that links the ATMs of different banks.
• Who runs it: NPCI (National Payments Corporation of India). NPCI took it over from IDRBT in 2009.
• What it does: a customer of Bank A can take out cash or check the balance at Bank B's ATM.
• Class 12 (Money and Banking) lists NFS among the financial-inclusion initiatives. Financial inclusion means bringing banking services to everyone, especially the poor.

White-label ATMs (WLAs)

• These are ATMs owned and run by non-bank companies, not by banks.
• RBI allowed them from 2012.
• Aim: to spread ATMs into smaller towns and villages, where banks had put in few machines.

UPI-based cardless withdrawal

• The ATM screen shows a QR code. You scan it with a UPI app and approve the withdrawal there.
• You do not need a card. This reduces card theft and skimming (copying card data with a hidden device).

2. Cheques

Definition

• A cheque is a paper instrument. It is a written order from you to your bank to pay a stated amount from your account to a named person.
• Drawer = the person who writes the cheque. Payee = the person who gets the money. Drawee = the bank that pays.

How it works (Class 7 example)

• You want to pay ₹5,000 to Rohan. You write the amount, Rohan's name and your signature on the cheque.
• Rohan deposits the cheque in his bank.
• Your account is debited (money goes out). Rohan's account is credited (money comes in).

Why cheques matter (Class 10 example)

• M. Salim pays his leather supplier ₹57,000 by cheque.
• The money moves "in a couple of days", and no cash changes hands.
• Key idea: cheques let demand deposits work as money. Demand deposits are bank deposits you can withdraw at any time.
• The cheque itself is not money.
• The demand deposit behind it is money.

Drawbacks (Class 7)

• You have to visit the bank.
• The transfer takes time.

3. Modern safeguards on cheques

Cheque Truncation System (CTS)

• Truncation means "stopping the flow of a physical cheque during the course of a clearing cycle, immediately on generation of an electronic image for transmission" [2].
• In simple words, the paper cheque stays with the bank where it was deposited. Only a scanned image goes to the paying bank.

• Clearing means the banks exchange and settle cheques among themselves.

• Benefits: faster clearing, no paper moving between cities, lower cost, and less risk of the cheque being lost or tampered with on the way.

• CTS covered the whole country by 2021.
• Timeline of standards
• Banks had to follow the CTS-2010 standard (common security features on cheque leaves) from 30 September 2012 [2].
• Non-CTS clearing sessions were discontinued on 31 December 2018 [2].
• The three regional CTS grids (Delhi, Chennai, Mumbai) were merged into one National Grid, run by the National Grid Clearing House (NGCH), Chennai, from 13 October 2023 [2].

• The presenting bank keeps the physical cheque for 10 years [2].

• Continuous clearing

• Old system: cheques were cleared in fixed batches, so money took a day or more to arrive.
• New system: cheques are scanned and sent continuously during the day, and settled within a few hours.
• The presentation session and the confirmation session (earlier called the return session) now run in tandem, which means at the same time [2].
• RBI laid down the rules in circular CO.DPSS.RLPD.No.S536/04-07-001/2025-2026, dated 13 August 2025 [2]. Rollout began in phases from October 2025 (verify current phase).

Positive Pay (January 2021)

• What it is: a fraud check.
• For big cheques, the drawer tells the bank the key details in advance: date, payee name, amount and cheque number.
• When the cheque comes for clearing, the bank matches it against these details.

• If they do not match, the bank flags the cheque.

• Thresholds

• Banks must offer Positive Pay for cheques of ₹50,000 and above [2].
• Banks "may consider making it mandatory" for cheques of ₹5,00,000 and above [2].

Cheque bounce

• Dishonour means the bank refuses to pay a cheque, for example because the account does not have enough money.
• Dishonour for lack of funds is a criminal offence under Section 138 of the Negotiable Instruments Act, 1881.
• Negotiable instrument = a document that promises payment and can be transferred to another person, such as a cheque, a promissory note or a bill of exchange.

4. Cards: plastic money

Debit card vs credit card

	Debit card	Credit card
Money used	Your own deposit	A loan from the bank
Uses	Cash at ATMs; payments at shops via POS	Buy now, repay later, up to a set limit
Cost	Amount deducted instantly	Interest-free within the billing grace period, then high interest
Is it money?	It is an access device for demand deposits (which are money)	It gives access to credit. The card itself is not money

Worked example: the credit card grace period (illustrative numbers)

• On 5 March you buy goods worth ₹10,000 on a credit card. The bill is due on 25 April.
• Case A: you pay ₹10,000 by 25 April → you pay no interest. You got a free loan for about 50 days.
• Case B: you pay only ₹2,000 → interest is charged on the unpaid ₹8,000. If the rate were 3% a month, that is ₹8,000 × 3% = ₹240 for one month, or about 36% a year. That is much costlier than most bank loans.
• Lesson: a credit card is cheap only if you repay in full and on time.

Point of Sale (POS)

• A POS machine is a swipe or insert machine at a shop that accepts card payments.
• Steps: swipe or insert the card → enter the amount → the customer types the PIN.
• "The amount is instantly deducted" (Class 7).

Plastic money

• Plastic money means plastic cards used in place of cash, "but not all of them money per se" (Class 10 teacher note).
• Class 7 (From Barter to Money) lists debit and credit cards among the new, intangible forms of money. Intangible means you cannot touch the money itself; only the card is physical.

Card networks

• A card network is the company whose system carries a card payment between the shop's bank and the card-holder's bank.
• Foreign networks: Visa and Mastercard.
• Domestic network: RuPay, launched by NPCI in 2012.
• RuPay credit cards can be linked to UPI from 2022. This means you can pay a small shop's UPI QR code using your credit limit.

Payments Infrastructure Development Fund (PIDF)

• Purpose: to give shops in small towns card and QR acceptance points. It subsidises (pays part of the cost of) payment devices where banks would not otherwise put them.
• Start: RBI began the scheme on 1 January 2021. It covers tier-3 to tier-6 centres and the North-Eastern states [6].
• Extensions of coverage
• From 26 August 2021, beneficiaries of PM SVANidhi (the street vendors' loan scheme) in tier-1 and tier-2 centres are also covered [6].
• On 29 December 2023, RBI extended the scheme up to 31 December 2025 [5].
• PM Vishwakarma beneficiaries were added in all centres [5].
• Sound boxes and Aadhaar-enabled biometric devices became eligible for subsidy [5].

• A uniform 90% subsidy applies in special-focus areas: the NE states and the UTs of J&K and Ladakh [5].

• Who funds it: RBI, card networks and card-issuing banks.

• Money in the fund (as of 30 November 2023) [5]
• Total corpus: ₹1,026.37 crore.
• RBI: ₹250 crore. Card networks: ₹474.48 crore. Card-issuing banks: ₹742.71 crore.

• Subsidy paid out: ₹541.73 crore.

• Devices deployed (as of 30 November 2023): about 8.28 lakh physical devices (POS) and roughly 2.7 crore digital devices (such as QR codes) [5].

• The tenure has been extended more than once; verify the current end date.

Card security

• EMV chip plus PIN at the counter.
• EMV is the global chip-card standard (Europay, Mastercard, Visa).

• A chip is much harder to copy than a magnetic stripe.

• Additional factor of authentication (AFA), usually an OTP (one-time password sent to your phone), is needed for online card payments.

• Card tokenisation
• What it is: your real 16-digit card number is replaced by a unique code called a token. The token works only for one merchant and one device.
• Why it helps: merchants may no longer store card numbers. So if a merchant's data leaks, no real card details are exposed.
• How the rules came in, step by step
  • 7 September 2021: RBI allowed Card-on-File Tokenisation (CoFT). Card-on-File (CoF) means card details saved by a website or app for future payments [4].
  • 28 July 2022: RBI kept the 1 October 2022 deadline. By that date, every entity other than card issuers and card networks had to purge (delete) the CoF data it had stored [3].
  • Guest checkout (paying without saving the card): merchants and payment aggregators may keep card data only up to T+4 days (T = transaction date) or until the settlement date, whichever is earlier [3].
  • Acquiring banks (the merchant's bank) could keep CoF data up to 31 January 2023 for work after the transaction, such as refunds and disputes [3].

Prelims Hooks

• NFS links the ATMs of different banks. It is run by NPCI, which took it over from IDRBT in 2009.
• White-label ATMs are owned and run by non-bank entities. RBI allowed them from 2012.
• Cheque truncation means the physical cheque stops at the presenting bank and only its electronic image moves [2]. The three CTS grids merged into one National Grid (NGCH, Chennai) on 13 October 2023 [2].
• Positive Pay: banks must offer it for cheques of ₹50,000 and above. It may be made mandatory for ₹5 lakh and above [2].
• Cheque bounce is a criminal offence under Section 138, Negotiable Instruments Act, 1881. It is not an offence under the RBI Act or the Banking Regulation Act (a common option trap).
• Trap: a debit card, a credit card and a cheque are not money themselves. The demand deposit that a debit card or cheque gives access to is money.
• RuPay is a domestic card network launched by NPCI in 2012. RuPay credit cards can be linked to UPI from 2022.
• Card tokenisation deadline: 1 October 2022. After it, only card issuers and card networks may store actual card data [3].
• PIDF started on 1 January 2021 and targets tier-3 to tier-6 centres and the NE. It is funded by RBI, card networks and card-issuing banks [5][6].

Mains Points

• Cash to cards to UPI shows cheaper, faster payments, but access is uneven
• NFS, white-label ATMs and PIDF spread payment points to small towns [5][6].
• But POS and QR density is still skewed towards cities.

• So demand-side factors still hold back inclusion in rural India: digital literacy, smartphone ownership and trust.

• Speed vs safety in cheque clearing

• Continuous clearing cuts the delay from days to hours [2].
• Positive Pay and the CTS-2010 standard reduce fraud [2].
• Section 138 prosecutions keep cheques trustworthy, but they also add to the pile of pending court cases.

• This makes a case for faster dispute-resolution mechanisms.

• Data protection in card payments

• Tokenisation moved card data out of the hands of lakhs of merchants [3][4].
• This matches the privacy thinking behind the Digital Personal Data Protection Act, 2023.

• Cost: merchants and payment aggregators had to spend on compliance, and deadlines were extended more than once [3].

• RuPay and strategic autonomy

• A domestic card network cuts dependence on Visa and Mastercard and lowers merchant fees.
• It also keeps payment data inside India and gives resilience against foreign sanctions.
• Linking RuPay credit cards to UPI brings credit into small merchant payments, not just the movement of money.