Define cheque
A check is a piece of paper that instructs the bank to transfer money from one person's or organization's bank account to another.The individual who writes the cheque is known as the "drawer," and the person to whom the cheque is given is known as the "payee." A cheque specifies the amount of money to be sent, the payee's name, the date, and the drawer's signature.
There are a few things to remember about cheques, which are listed below:
- A cheque may only be written against a checking or savings account.
- A cheque without a date is deemed void.
- Only the payee, in whose name the cheque was issued, has the authority to cash it.
- A cheque is only good for three months from the day it was issued.
- The bottom of the check has a 9-digit MICR (Magnetic Ink Character Recognition) code.
This makes it easier for banks to clear checks.
Bearer Cheque
A bearer check is one in which the bearer is authorized to have the cheque cashed.
This indicates that the individual who delivers the cheque to the bank has the power to request encashment.
This form of a cheque can be used to withdraw cash.
This type of check can be endorsed.
The bearer of the cheque does not need to provide any identification.
For example, Arjun (the drawer) has signed a cheque, and Varun is the payee.
Varun can either go to the bank personally or send a third party to receive the cheque encashment.
The bearer's name shall not need identification.
Order Cheque
This form of a cheque cannot be endorsed, which means that only the payee whose name appears on the cheque is eligible to receive cash for the amount specified. The drawer must strike the "OR BEARER" mark as specified on the check in order for the cheque to be encashed exclusively to the payee. For example, if a cheque is signed in the name of Varun, only the payee can visit the bank to obtain encashment for an order cheque.
Before paying out the funds, the bank may verify the payee's identification.
Crossed cheque
No cash may be withdrawn from this type of check.
Only from the drawer's account to the payee's account can the money be moved.
Any third person can go to the bank and deposit the check.
When a cheque is crossed, the drawer must draw two lines in the left upper corner of the cheque.
Account Payee Cheque
This is the same as an account payee cheque, except there is no need for a third party to be involved.
The funds will be sent immediately to the account number of the payee.
To identify an account payee cheque, two lines are drawn on the left upper corner of the cheque and labeled "A/C PAYEE."
Stale Cheque
In India, a cheque is only valid for three months from the date of issue.
So, if a payee goes to the bank to request a withdrawal for a cheque written three months earlier, the cheque will be ruled stale.
For example, if a cheque is dated January 1, 2021, and the payee comes to the bank for a withdrawal on May 1, 2021, his or her request would be rejected, and the cheque will be termed stale.
Post Dated Cheque
If the drawer wishes the payee to ask for a withdrawal or transfer of funds after the current date, he or she can fill out a post-dated check.
For example, if the drawer is completing the cheque on May 10, 2021, but wishes to make the payment later, he/she might enter the cheque dates as May 30, 2021.
It will be known as a post-dated cheque.
Ante - Dated Cheque
An ante-dated cheque is one on which the drawer indicates a date anterior to the current date on the cheque.
For instance, suppose the current date is January 30, 2021, and the drawer dates the cheque January 1, 2021.
It will be treated as an ante-dated check.
Self Cheque
If the drawer wants cash for himself, he can put "SELF" in lieu of the Payee's name on a cheque and have it cashed at the bank where he has an account.
For example, if a person needs Rs.1,00,000/- in cash, he can write a self-check and take it to his bank branch where he has an account for encashment instead of a cheque.
Traveler’s Cheque
The Traveler's cheque, as the name implies, can be used while traveling overseas where Indian cash is not accepted.
If a person is traveling overseas, he can bring a traveler's check with him and have it cashed in other countries.
Mutilated Cheque
A mangled check is one that arrives at the bank in a ripped state.
If the cheque is split into two or more parts, and the required information is torn, the bank must refuse and declare the cheque void until the drawer confirms its validity.
If the cheque is torn from the corners but all of the critical data on the cheque is still intact, the bank may proceed with the processing.
Blank Cheque
When a cheque simply includes the drawer's signature and all other areas are left blank, it is referred to as a blank cheque.
The above-mentioned cheque kinds are the most well-known and widely utilized in the Indian banking business.
Let us now look at the parties involved with a cheque.The number of parties participating in a cheque transaction.
With a cheque, there are three people involved.
- Drawer or Maker - The client or account holder who issues the cheque is known as the drawer.
- Drawee - The drawee is the bank on which the cheque is drawn. Keep in mind that a check is always drawn on a specific banker.
- Payee - The individual identified in the cheque who receives payment for the amount specified in the cheque. In some circumstances (such as when the drawer writes a self-check), the drawer and the payee might be the same person.
Aside from these three, there are two other individuals engaged in a check -
- Endorser: A party is considered an endorser when he or she transfers his or her right to receive payment to another party.
- Endorsee: The party to whom the right is conveyed is referred to as the endorsee.
What exactly are three-party cheques?
In a cheque transaction, three people are engaged. The drawer is the individual or organisation who issues the check, the drawee is the financial institution, and the payee is the individual or organisation who receives the cheque.What exactly is a bearer cheque?
A bearer cheque is one that is paid to the person who is holding or carrying the cheque. These cheques are transferable by delivery, which means that if you bring the cheque to the bank, you will be paid.
Who is cheque drawee?
The individual who creates a bill of exchange or cheque is known as the "drawer," and the person who is advised to pay is known as the "drawee."
What exactly is a cash cheque?
A cheque, sometimes known as a check in American English, is a document that instructs a bank (or credit union) to pay a certain sum of money from a person's account to the person whose name the cheque is issued.
