Types Of Cheques In Indian Banking System

A cheque is a written order by an accountholder to the bank to pay a certain amount of money to an individual or an organisation in whose favour the accountholder issues the cheque. Despite the growth in digital payments, cheques still remain important in business transactions, legal settlements and person-to-person payments. Familiarity with various types of cheques allows users to use them properly, without any errors.

Blank Cheque

A blank cheque is signed by the accountholder but does not carry any amount. The recipient may fill the amount as agreed. These cheques are risky and must be issued only to trusted individuals, as misusing them can cause financial loss.

Order Cheque

An order cheque can only be paid to the individual whose name appears on the cheque or to one who is authorised by that individual. The bank checks the identity of the individual before honouring the cheque. This renders order cheques safer than bearer cheques.

Bearer Cheque

A bearer cheque is payable to the person presenting it at the bank over the counter. Identification evidence is not required for encashment, making it fast and easy. Such cheques are used for small transactions, but are vulnerable to abuse in case of loss or theft, as anyone in possession of the cheque can withdraw money.

Crossed Cheque

A crossed cheque features two parallel lines on the top left corner. This makes the amount payable only to the account of the payee and not over the counter. It provides an additional level of security and makes fraud less likely to occur. Crossed cheques are commonly used for business transactions and salary payments.

Account Payee Cheque

When a cheque is endorsed with “Account Payee Only” in between parallel lines, it is called an account payee cheque. This cheque is only payable to the account of the individual whose name is mentioned on the face of the cheque. No third party can encash that cheque. Account payee cheques are generally used for secure transfer of high amounts as well as for government transactions.

Stale Cheque

Every cheque remains valid for three months from the date of issue. If submitted after three months, it is referred to as a stale cheque and will be rejected by the bank. Individuals should always make sure to deposit cheques in time to prevent rejection.

Post-Dated Cheque

A post-dated cheque has a future date written on it. The bank will clear it only on or after the date mentioned on the cheque. They are mostly used for loan repayment, instalments, or advance payment. Though convenient for regular payments, the issuer needs to have enough balance on the due date so that it does not bounce.

Ante-Dated Cheque

An ante-dated cheque has a previous date. Provided that the date does not exceed the three-month validity period, it will be accepted by the bank. These cheques are normally drawn up when backdating is necessitated for accounting or settlement reasons.

Banker’s Cheque

A banker’s cheque is drawn by the bank at the request of the customer. The payment is assured by the bank and cannot bounce. Such cheques are usually used for big transactions, such as property purchases or institutional settlements

Traveller’s Cheque

Traveller's cheques were once the most common with people when travelling overseas. They were encashable at foreign banks or applicable for international payments. With the popularity of digital forex cards and direct online transfers, their usage has declined. However, they still remain an accepted means of secure international payment.

Cheques are still used as the most reliable method of banking transactions in India. From everyday payments to business settlements, cheques remain the de-facto instrument for making payments for reasons of security and legal safeguard over the convenience of immediate digital payments.