What is  Cheque?

A cheque may be issued against a current account or a savings account. Every bank cheque has a number, MICR and IFSC code. Under this mode of payment, there are three parties in the on-track movement.

It is a financial document that orders a bank to pay a particular amount of money from a person’s account to another individual’s or company’s account in whose name it has been made or issued.

A cheque is a bill of exchange in which one party orders the bank to transfer the money to the bank account of another party. It is a negotiable instrument that comes under the Negotiable Instruments Act, 1881.

Parties to a Cheque

1. Drawer: He is the person who draws the it, i.e., the depositor of money in the bank.

2. Drawee: It is the drawer’s banker on whom the it has been drawn.

3. Payee: He is the person who is suppose to receive the payment.

4. The holder, indorser and indorsee (the same as in the case of a bill or note).

Apart from the above-mentioned parties, there are two more parties:

• Endorser: He/she is an endorser means when a party transfers his right to take the payment to another party.
• Endorsee: The party in whose favour, the right is transferred, is called endorsee.

Main Features

• It is an unconditional order
• It is always drawn on a particular bank
• Signature on the exchequer is a mandate and should be only by the maker
• The amount is always a certain sum of money of one’s account
• It is always payable on demand
• A cheque’s payment is always in cash
• The cash amount is to be paid to the person mentioned therein, or order, or the bearer

Types of Cheques

Some key types of cheques in India are:

1. Bearer Cheque: This can be encashed by the bearer (person carrying/bearing) on presentation before the authorised bank. Banks do not require authorisation to be permitted to make payment from the issuer for these cheques.
2. Order Cheque: This type can be encashed only by the payee, that is, the person whose name has been written on it.
3. Open Cheque: This is an uncrossed cheque that can be encashed at any bank and the payment can be made to the person bearing it. It can also be transferred from the original payee to a different payee. The issuer is required to put his signature on both the front and back of it.
4. Crossed: Also known as the account payee cheque. On the top left corner, it has the words ‘’account payee’’ written enclosed in two parallel lines. These lines ensure that the payment is made only to the person whose name is written on it and hence are the safest types of cheques to issue.
5. Post-dated Cheque: This has a later date of being encashed and can be used to meet a future financial obligation. Even if these are presented to the bank by the bearer immediately, the payment is processed by the bank only on the date mentioned on it. These cheques are valid for up to 3 months from the date of issuance.
6. Stale Cheque: Three months past the date of issuance, a cheque is past its validity and is called a stale cheque.
7. Banker’s: It is issued by the bank and guarantees payment.
8. Self-Cheque: A self-cheque has the word ‘self’ written in the drawee column and can only be drawn at the issuer’s bank.
9. Traveller’s Cheque: Foreigners can use this on a vacation in place of hard cash. One bank issues this and can be encashed in the https://oyo4d.one/ form of currency at a different bank in a foreign location/country. Traveller’s cheques don’t have an expiry date and can be used at later date.