A cheque is a negotiable instrument instructing a financial institution to pay a specific amount of money from a specified transactional account held in the drawer’s name with that institution.
Parties to a cheque are drawer (who is writing the cheque), drawee (the bank with whom the account is maintained) and payee (the person named in the cheque).
Local Cheques : Banks are required to give credit/ debit for local cheques on the same day or at the most the next day of their presentation in clearing.
Outstation Cheques : Maximum timeframe for collection of cheques drawn on state capital/ major cities/ other locations are 7/10/14 days respectively. If there is any delay in collection beyond this period, you are entitled to pay interest at the rate specified in Cheque Collection Policy of the bank.
Cheques are mainly of four types :
1) Open cheque : A cheque is called open when it is possible to get cash over the counter at the bank. The holder of an open cheque can receive payment over the counter at the bank, deposit the cheque in his own account or pass it to someone else by signing on the back of a cheque.
2) Bearer cheque: A cheque which is payable to any person who presents it for payment at the bank counter is called ‘Bearer cheque’. A bearer cheque can be transferred by mere delivery and requires no endorsement.
3) Order cheque: It is the one which is payable to a particular person. In such a cheque the word ‘bearer’ may be cut out or cancelled and the word ‘order’ may be written. The payee can transfer an order cheque to someone else by signing his or her name on the back of it.
4) Crossed cheque: When a cheque is crossed, the holder cannot encash it at the counter of the bank. The
payment of such cheque is only credited to the bank account of the payee. Crossed cheque is done by drawing two parallel lines across top left corner of the cheque, with or without writing ‘Account payee’ in the space between the lines.