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Cheque is an important negotiable instrument which
can be transferred by mere hand delivery.
Cheque is used to make safe and convenient payment
It is less risky and the danger of loss is minimised.
"Cheque is an instrument in writing containing an
unconditional order, addressed to a banker, sign by the
person who has deposited money with the banker,
requiring him to pay on demand a certain sum of
money only to or to the order of certain person or to
the bearer of instrument."
1. Bearer Cheque;
When the words "or bearer" appearing on the face of
the cheque are not cancelled, the cheque is called a
The bearer cheque is payable to the person specified
therein or to any other else who presents it to the bank
However, such cheques are risky, this is because if such
cheques are lost, the finder of the cheque can collect
payment from the bank.
When the word "bearer" appearing on the face of a
cheque is cancelled and when in its place the word "or
order" is written on the face of the cheque, the cheque
is called an order cheque.
Such a cheque is payable to the person specified
therein as the payee, or to any one else to whom it is
When a cheque is not crossed, it is known as an "Open
Cheque" or an "Uncrossed Cheque".
The payment of such a cheque can be obtained at the
counter of the bank.
An open cheque may be a bearer cheque or an order
Crossing of cheque means drawing two parallel lines
on the face of the cheque with or without additional
words like "& CO." or "Account Payee" or "Not
A crossed cheque cannot be encashed at the cash
counter of a bank but it can only be credited to the
If a cheque bears a date earlier than the date on which
it is presented to the bank, it is called as "anti-dated
Such a cheque is valid up to six months from the date
of the cheque.
If a cheque bears a date which is yet to come (future
date) then it is known as post-dated cheque.
A post dated cheque cannot be honoured earlier than
the date on the cheque.
If a cheque is presented for payment after six months
from the date of the cheque it is called stale cheque.
A stale cheque is not honoured by the bank.
The cheque which is an order upon a commercial bank
by its client who has already deposited money with it is
also called customers sight draft.
These cheques are used where the drawer of the
cheque is not trust worthy
. It is that cheque on which the payment is guarantee
to the payee by the drawee bank.
When the cheque is presented to officer of the bank he
writes certified or accepted on the face of the cheque
The cheque is honored whenever it is presented to the
It is drawn upon a bank by its own officer for meeting
the expenses of the banks.
A person who wants to transfer a certain sum of money
may use bank money order.
The person has to pay the amount of the money order
plus a bank fee and receives the registered cheque
from the bank.
He then signs the cheque, fill in the name of the
person and then forward the cheque to the payee.
These cheques enables the tourists to meet the
expenses of their trip.
These are not only acceptable by the issuing bank but
also by the merchants and hotels inside and outside
The procedure is simply to pay the bank amount of the
order and the bank commission.
The bank will issue cheques on which the value is
The guarantor has to sign all the cheques issued in the
presence of issuing banker.
A draft is a cheque drawn by one bank upon another
bank ordering to pay the payee.
Bank drafts are commonly used inside and outside the
country for the transfer of money.
It has also helped in financing the foreign trade.