Type of cheques in banking system in India

A cheque is a dated and signed document that orders a bank to pay a specific amount of money from a person’s account to the person in whose name the cheque has been issued. The Cheque is a type bill of exchange as per Negotiable Instruments Act 1881. In this article, we will learn about the “Type of cheques in the banking system in India”.

Type of cheques in banking system in India

Cheque Related Terms-

  • Drawer– The person/Account holder who writes the check
  • Payee– Person on which name cheque is written
    Drawee– In cheque drawer order their bank to draw money from his account. The bank which holds drawer account is known as drawee.
  • Validity- 3 months from the date of issue
    Note: From April 1, 2012, RBI reduced validity for Cheques, Drafts, Pay orders from 6 months to 3 months.
  • MICR (Magnetic Ink Character Recognition) code is a character-recognition technology used mainly by the banks to ease the processing and clearance of cheques
  • This code is printed at the bottom of cheques and includes the document type indicator, bank code, bank account number, cheque number, cheque amount, and a control indicator.

Types of Cheques-

  1. Bearer Cheque-
  • In this type of cheque, the person who bears the cheque is authorised to collect the amount of money.
  • This type of cheque is endorsable.
    Example: Drawer- Ram, Payee- Shyam
    Shaym can endorse it to his friend Mohan. Mohan can collect the amount from Bank.
  • No identification is required at the time of presenting the cheque to the Bank.
  1. Order Cheque-
  • In this type of cheque only that person whose name is written (by the issuer) on the cheque, is authorised to collect the amount.
  • A Bearer cheque will become order cheque if by payee name the word “Or Bearer” is replaced by the word “Or Order”.
  • Identification is required at the time of presenting the cheque to the Bank.
  1. Blank Cheque-
  • In this type of cheque, drawer put his/her sign on the cheque and left all other columns empty.
  1. Ante-Dated Cheque-
  • If Cheque issue by drawer prior to the date of signing a cheque, this type of cheque is known as the Anti-Dated cheque.
  • Example-
    Suppose Today’s date is 16/01/2018
    If we issue a check today and put a date 01/01/2018, this type of cheque is known as Anti-Dated Cheque.
  1. Post-Dated Cheque-
  • If the cheque issued by the drawer to the payee for the upcoming withdrawn date, this type of cheque is known as the Post-Dated cheque.
  • Example-
    Suppose Today’s date is 16/01/2018
    If we issue a check today and put a date 16/02/2018, this type of cheque is known as Post-Dated Cheque.
  1. Stale Cheque-
  • If any cheque issued by a drawer does not get withdrawn from the bank until three months, then this type of cheque is known as the stale cheque.
  1. Crossed Cheque-
  • If two parallel line made on the front part of the cheques, this type of cheque is known as the crossed cheque.
  • In this type of cheque, the payee cannot withdraw money in cash but money can transfer to the payee account.
  • This type of cheque is endorsable.
  1. Open (Uncrossed) Cheque-
  • When a cheque is not crossed and payable at the counter of the bank on presentation of the cheque.
  1. Self-Cheque-
  • A self-cheque is written by drawer as pay self to receive the money in the physical form from the branch where he holds his account.
  1. Mutilated Cheque-
  • In this type of cheque, the cheque is torn into two or more pieces such cheque is Mutilated Cheque.
  • If it is presented for payment, such a cheque the bank will not make payment against such a cheque without getting confirmation of the drawer.
  1. GIFT Cheque-
  • This type of cheque issued by banks with small extra charges, when customer demands Gift Cheque.
  • Example: Honour Gift cheque in Cricket match.
  1. Pay yourself cheque-
  • These are the type of crossed cheque to the bank asking the bank deduct money from his account into bank’s own account for the purpose buying banking products like drafts, pay orders, fixed deposit receipts etc.
  1. Traveller Cheque-
  • These type of cheques are used for withdrawal of money while travelling.
  • These cheques can be encashed abroad where foreign currency is normally acceptable.
  1. Local Cheque
  • This type of cheque is valid in the given city and a given branch in which the drawer has an account.
  1. Outstation Cheque-
  • If the local cheque is presented in other cities, it shall attract some fixed banking charges.

  16.  At par cheque-

  • In this type of cheque, it is accepted at all its branches across the country.

  17.  Banker’s cheque-

  • These type of cheques are issued by the bank itself and guarantees a payment.
  • These cheques are not dishonoured as the money will be paid to bank beforehand.

All the best for your exams

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