Government Eyes Decriminalization of Minor Economic Offences Including Cheque Bounce

The central government seeks opinion to decriminalize acts of Parliament that are currently listed as economic offences and are punishable with a jail term, fine, or both. In order to get the opinion on the matter from stakeholders, the Finance Ministry’s Department of Financial Services, or Banking Department, has asked state governments, UT administrations, civil society, non-government organizations, academicians, public and private sector organizations, multilateral institutions, and members of the public to send their views and comments by June 23. Since, the government doesn’t want to make things easier for criminals, the finance ministry has proposed a balance under which criminals will face punishment and minor offences would be compounded.

Having consulted various stakeholders, the Center has proposed an inclusion of amendment to the Negotiable Instrument Act covering the dishonoring of a cheque. According to the government, this will speed up the economic revival process by encouraging businesses during the COVID-19 pandemic and economic distress when there might be a rise in financial failures which, under current rules, may get treated as frauds. According to the government, Criminal penalties of the likes of imprisonment for mere offences act as deterrents impacting business sentiment for both domestic as well as foreign investors. Other acts set to witness changes with a consensus include the RBI Act, NABARD Act, SARFAESI Act, Insurance Act, PFRDA Act, and Payments and Settlements Systems Act. The Finance Ministry has also issued a “Statement of Reasons” for proposing change to the offences (as per current law) committed by any individual under various sections of Banning of Unregulated Deposit Schemes Act and others. As per the current law, the accused payee of a cheque that gets dishonored or anyone who runs an unregulated deposit scheme that goes insolvent may face either imprisonment or fine or both. The “Statement of Reasons” seems to create a legal system where a penalty is the new deterrent.


Decriminalisation of Dishonouring of a Cheque and The Frequency of Bad Cheques

Taking a peek at the research paper of Basak Babaoglu, and Alexander J. Wulf, we found an analysis of three periods of legal situations regarding the bouncing of cheques and their relation to a rise in the number of bad cheques in Turkey.

  1. The period before 2009 when the issuance of bad cheques was subject to imprisonment,
  2. The period between 2009-2012 when a partial decriminalization took place and
  3. The period between 2012-2014 when the issuance of bouncing cheques was fully decriminalized and penalties were reduced to only administrative fines.

Their analysis for Turkey eventually led to the finding that while there is no statistical evidence for an association between the partial decriminalization period and the frequency with which cheques bounced in Turkey, however, full decriminalization of bouncing cheques led to an increase in the frequency of bad cheques. It also affirms that the establishment of a Risk Center by the Bank Association of Turkey helped in decreasing the frequency of bad cheques.

BeginUp editorial will shortly bring opinion from stakeholders in the matter . 


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