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Types Of Cheques in India, Benefits and Uses

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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:

  • Drawer: The person who writes the cheque
  • Payee: The person in whose name the cheque has been issued.
  • Drawee: Bank
  • Endorser: The person who transfers his/her right to another person
  • Endorsee: The person to whom the right of the cheque is transferred

Types of Cheques India

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:

1.     Bearer Cheque or open Cheque

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.

2.     Order Cheque

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.

3.     Crossed cheque

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.

4.     Ante-Dated Cheque

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.

5.     Post-Dated 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.

6.     Stale 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.

7.     A self-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.

Cheque Truncation System

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.

Types Of Cheque India FAQ

What is a bearer cheque?

A bearer cheque allows payment to the individual carrying the cheque without the need of any authorization.

What is the difference between an order cheque from a bearer cheque?

An order cheque is payable to a specified person whose name is on the cheque. In a bearer cheque, it isn’t so.

How is a crossed cheque different from other cheques?

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.

What is an ante-dated cheque?

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.

When can a post-dated cheque be processed?

A post-dated cheque is processed only on or after the future date mentioned on the cheque.

What happens to a stale cheque?

A stale cheque is one presented for payment after 3 months from its date. The bank does not honour it.

What is a self-cheque?

A self-cheque is written by the account holder to withdraw money personally from their own account at their bank branch.

Asad Yar Khan

I write and oversee the creation of informative educational blogs centering around study strategies, exam techniques, and more, to guide aspirants in clearing SSC, banking, engineering, and other competitive exams. I ensure a range of subjects are covered with precision and clarity. With over 7 years of diverse writing experience, I share a wealth of wisdom and expertise with thousands of students, through PracticeMock every day, helping them achieve their goals.

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