Looks like RBI guidelines to dishonour cheques on alteration/modification on name and amount is on Hold. I received an email from HDFC Bank which says :
With reference to the appended mail on prohibition of alteration/modification on the cheques, we wish to advise that the earlier instruction of returning such cheques is being kept on hold. The said guidelines are kept on hold and new actionable/date (if any) will be advised to all in due course.
RBI is already working on Cheque Truncation System but looks like either there are a lot of such high valued cheques there with modifications on it or more time is required.
Did you know RBI has provisions if you want to complain against banks ?