Types of Cheque in India: A cheque is a financial instrument that orders a bank to pay a particular amount of money from an individual’s account called the payer/drawer to the person called the payee, in whose name it is issued. In India and around the world, cheques are still termed as an important means of business and other transactions. They are important documents as they provide a safe, secure, and documented method of payment. It allows an individual to transfer his/her funds without the need to carry cash. They also offer a paper trail for financial transactions. This helps in keeping records and accountability. The payer/drawer pens various details on the cheque, which includes the monetary amount, date, and a payee on the cheque, and signs it. He/she then orders their bank, which is known as the drawee, to pay the amount of money stated to the payee. Here are a few related terms to keep in mind:
India’s diverse banking needs demand different types of cheques for smoother financial transactions. Every type of cheque grants a unique standard of security. They provide convenience for multiple scenarios of transaction. Cheques assist or promote specific payment instructions. They make sure the money transfer is safe and is also traceable. Some cheques are specifically designed for non-cash transactions, whereas others allow quick withdrawal of funds. Plus, certain cheques are meant for post-dated or future-dated payments. These many different types of cheques tackle or suit both personal and demands for business banking. Given below are different types of cheques:
A bearer cheque or open cheque is a cheque in which the individual bearing/carrying his/her name on the cheque can receive the payment. It is transferable by nature. The bank will not ask for any authorization from the issuer while allowing the payment to the person who will carry the cheque to the bank. It can easily be identified by the words ‘or bearer’ printed on them.
When the word ‘’bearer’’ is canceled and the word ‘’order’’ is written in its place, the cheque is called Order Cheques. It can only be issued by a person whose name is mentioned on the cheque. They don’t do any investigation to authenticate the cheque bearer’s identity before making the payment. In short, this cheque is payable to the person who is the payee, or to whom it has been endorsed or transferred.
When two parallel lines are drawn on the face of the cheque or when it is crossed with or or without additional words like “& CO.” or “Account Payee” or “Not Negotiable”, it is called a crossed cheque. It can only be credited to the payee’s account and cannot be encashed at the cash counter of a bank.
Ante-dated cheque refers to that cheque which has in it a date earlier than the date on which it is presented to the bank. The validity of the cheque is up to 3 months from the date of the cheque.
The cheque which has on it the future date or the later date is called a post-dated cheque. A cheque dated for a future occasion will not be processed before the specified date mentioned on the cheque.
The cheque which is presented or shown for payment after 3 months from the date of the cheque is called a stale cheque. The bank doesn’t honour the stale cheque.
When the account holder writes a self-cheque to pay self to receive the money physically from the bank branch where he/she holds his/her account. In it, the word ‘self’ is written in the drawee column.
Truncation is a medium of stopping a paper cheque from going all the way to the bank that would disburse the money. Through this, a digital picture of it is sent to the bank, in place of the paper cheque. This digital process happens through a system that banks use to exchange cheques. By doing this, there’s no need to move the paper cheque around. And so, it saves money. Also, it speeds up the time it takes for the cheque to get processed.
A bearer cheque allows payment to the individual carrying the cheque without the need of any authorization.
An order cheque is payable to a specified person whose name is on the cheque. In a bearer cheque, it isn’t so.
A crossed cheque has two parallel lines and can only be credited to the payee’s account. It cannot be encashed over the bank’s counter.
An ante-dated cheque is dated earlier than the date it is presented to the bank. It is valid for up to 3 months from the date on the cheque.
A post-dated cheque is processed only on or after the future date mentioned on the cheque.
A stale cheque is one presented for payment after 3 months from its date. The bank does not honour it.
A self-cheque is written by the account holder to withdraw money personally from their own account at their bank branch.
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