Types of Cheques in India – The Indian financial sector has a variety of payment and fund transfer modes now, for example, UPI apps, wallets but cheque has remained the largest in the country. A cheque is a written document, either by an individual or institution instructing the bank to pay a certain amount of money to another account or person whose names are on the cheque.
Category of Cheques in India
Cheques are categorised into two types in India:
- Simple cheque
- Multi-city cheque
1. Simple Cheques
These types of cheques are what existed before. Only home branches could use this category. This has been replaced by the multi-city category.
2. Multi-city Cheques
Its that cheque, which can perform transactions from any branch of the bank across the country. These days banks have adopted this because of its flexibility to customers.
Different Types of Cheques in India are:
1. Bearer cheque
On the cheque leaf, the word “Bearer’ or “a stroke”, it means that anyone holding this cheque can withdraw the amount indicated provided the cheque is signed. These cheques are very risky in case of misplacement.
2. Crossed cheque
A bearer cheque becomes crossed cheque when it has two parallel lines on its left top corner. This is considered as the safest cheque because the person cannot withdraw the cash given his name is not indicated on the cheque.
3. Self Cheque
This cheque is drawn to withdraw from own accounts. Such cheques bear the word “self” below the pay column. Mostly is used in home bank withdrawal because other banks disregard it.
4. Mutilated Cheque
In this type of cheque, the cheque is torn into two or more pieces. Whenever it is presented to the bank, confirmation has to be done from the drawer so as to allow the transaction.
5. Loose Cheque
When you make a new checkbook request, it typically takes at least five business days before you receive it. In the interim, if you need to use a cheque urgently, banks issue loose cheques for a fee.
6. Traveler Cheque
This is used to withdraw money while traveling. With countries accepting foreign currency, these cheques are acceptable and one can be given money.
7. Local Cheque
These cheques are limited to cities and banks with which the drawer is registered. They are said to be valid when operating within the boundaries of certain geographical regions.
8. Open Cheque
This refers to cheques that are not crossed and on presentation to the cashier table, they are valid and can perform transactions.
9. Pay yourself Cheque
They are usually given by crossing which direct banks to deduct money from the drawer account to pay for purchases within the bank.
10. Post-dated Cheque
This refers to the cheque which has future date noted on them during their issuance. They serve the purpose of making purchases on prospective dates.
11. At par Cheque
This type of cheque is acceptable in all branches across the country.
12. Bankers Cheque
The bank itself issues this cheque. It is never dishonorable because it’s payment is facilitated on the basis of beforehand.
13. Outstation Cheque
This refers to the local cheque when presented outside of the city upon which it has to incur an extra cost.
14. Stale Cheque
If any cheque stays up to 3 months after issuance by the drawer and it has not been taken to the bank for withdrawal, these cheques are called stale.
15. Blank Cheque
This cheque only has the drawer’s signature and the other columns are left blank.
16. Ante Dated Cheque
A cheque issued prior to the date of signing by the drawer
17. Order cheque
Whenever the bearer word is stroke and instead the word order is written in the face of the cheque, it’s called order cheque and only the person whose name appears to the cheque can be able to withdraw from the bank.
18. Account Payee cheque
A bearer cheque, with two crossing and parallel lines on the left top corner, and bearing the name account Payee is called account Payee cheque.
The difference between crossed cheque and account Payee cheque.
Account Payee cheques can’t be endorsed to others, the only person who can withdraw is him or her whose names are written on the cheque face. Crossed cheques are flexible and allow endorsement of the cheque to other parties.
19. GIFT Cheque
When customers demand gift cheques, they come with very small added extra charges.
Cheque related Terms
- Drawer – Refers to the person owning the accounts from which funds are supposed to be deducted from.
- Payee – Person on which name cheque is written.
- Drawee – Refers to the bank that is having the money of the drawer.
- Validity – It is usually 3 months from the date of issuance of the cheque.
- Magnetic ink character recognition code – This is a character code, usually 9 digits on the cheque indicating bank and branch taking part in the electronic clearing system. Usually, these codes are printed at the bottom of the cheque and are used to ease the processing and clearance of cheques.
How to Write a Cheque?
- Step 1: The first step is to cross a cheque, which means drawing two lines, which are parallel to each other, on the left-hand corner of the cheque leaf.
- Step 2: Write the date and write the name of the payee in the ‘Pay’ column. Proceed to write the amount of money in words and don’t forget to include the word ‘only’ at the end.
- Step 3: Write the amount of money in numbers followed by this symbol ‘/-.’
- Step 4: Sign at the bottom of the cheque
Don’ts, while writing the Cheque
- Never do an overwriting on a cheque leaf because it may seem as a correction which is not acceptable during a time of presentation.
- Remember never to leave any kind of space between numbers or words on the leaf because the person may add numbers to change names or amounts indicated.
- Never leave any column blank on a cheque
- Do not fold or staple a cheque
- Sign clearly and always use the same signature resembling the specimen in the bank.
What is the Dishonor of Cheques?
A cheque becomes a dishonored cheque when, on presentation to the bank, it is returned by the bank due to there being an issue in it.
Dishonoring of cheques may result from:
- Insufficient funds in the drawer account.
- Request to stop the transaction by the Payee.
- Closed accounts requesting the transfer of funds.
- Spelling errors
- Mistakes in dates
- Overwriting
- Signature mismatch
- The disparity in the amount written in figure and words, and so on.
Characteristics of a Cheque
The following are the essential characteristics of a cheque:
- It has to be in writing
- It has to be an unconditional order
- A banker has to be specified
- Payment should be directed to a specified person
- It should be payable on demand
- It should be for a specific sum of money
- Should have the signature of the drawer
Conclusion
Using cheques is safer when it comes to the issue of handling cash. I, therefore, recommend ad urge those who have the ability and opportunity to use the convenient cheques. Of the list above, there are those which are less risky and safer to use.
I tried to list all the types of cheques in India. If still anything missing let me know and help me to complete the list of types of cheques in India list.