KARACHI, June 14: The State Bank has advised all banks and development finance institutions (DFIs) to cite specific and clear reasons for dishonouring a cheque.

In a letter issued to all banks and DFIs on Tuesday, the central bank further advised them to discontinue the practice of issuing disclaimer for indemnifying themselves against any breach of “stop payment” instructions from their customers.

The letter says that the central bank, during the course of regular inspections, “would particularly check the compliance of the above instructions as a part of its consumer interest protection responsibilities.”

It warns that non-compliance would attract penal action against the banks and DFIs.

The SBP has issued the above directive to banks and DFIs after having observed that some banks give ambiguous reasons like “refer to drawer” when a cheque is returned unpaid by them for insufficient balance or for any other reason. “As a result, the beneficiary of the cheque is not in a position to take action against the issuer of the cheque under the provisions of relevant laws,” says the SBP letter.

“Similarly, banks while responding to the cheque “stop payment written instructions” from their customers issue disclaimers for indemnifying themselves against breach of these instructions. That negates the very purpose of the stop payment instructions.