What is a Banker’s Cheque?
A banker’s cheque similar to a banker’s draft is guaranteed by the bank. This is a pay order drawn on bank’s own funds and signed by a cashier. Banker’s cheques are mostly used for making real estate payments, brokerage payments and institutional payments. The beneficiary needs to deposit a banker’s cheque to the bank to receive the mentioned amount of money. The cheques are usually cleared one day after the deposit.
Features of a Banker’s Cheque:
A banker’s cheque has certain distinctive features. It includes the name of the issuing bank along with its location (upper left-hand corner or upper centre), payee’s name, the amount to be tendered (both in alphabets and numbers) and a printed (facsimile) signature of the cashier or senior executive officer of the bank.
A banker’s cheque also contains some security features such as a watermark, security thread, colour-shifting ink and a special bond paper. All these features make the cheque more secure to counterfeit items.
Some other features of a banker’s cheque include:
- Banker’s cheques are issued only for the clearing area of the respective bank. It can be cleared in any branch of the same bank and city as it comes under the local jurisdiction.
- The validity of a banker’s cheque is 3 months from the date of issue.
- A banker’s cheque cannot dishonour at all unless it is a fake.
Types of Cheques in India:
Banks provide chequebook facility to their customers according to their account type. The number of cheques in a chequebook also varies as per the type of the chequebook and account. Here is a brief explanation of different types of cheques available in India.
- Bearer Cheque: You can often find cheque leaves printed with the word ‘bearer.’ This means the person holding the signed cheque can withdraw the mentioned amount. These cheques are most vulnerable to frauds and counterfeits and thefts. You can suffer severe financial loss if you have misplaced a bearer cheque.
- Self Cheque (for yourself/third party): These cheques are used for withdrawing money from your own account. It has the account holder’s name on it. Self-cheques are encashed from the branch where you have a bank account.
Self cheques can be issued to a third party as well. In this case, the issuer can write ‘self’ instead of writing the name of the third party. Writing ‘self’ on cheques is not safe at all as anyone can claim the cheque as his/her own and the issuer and the bank will not have any clue about the person who encashed the cheque. This situation worsens in the case of a lost or misplaced cheque.
- Pay Yourself Cheque: These cheques are issued by crossing on them as the issuer wants the bank to deduct the money from his/her account. Pay yourself cheques are issued for buying bank drafts, pay orders and fixed deposit receipts.
- PDC: PDC stands for Post Dated Cheques. These cheques are issued with a future date on them as the issuer wants the cheque to be encashed at a specific time. These cheques are issued for making business payments and EMIs.
- Local Cheque: These cheques are issued for presenting to a bank located within the city limits. However, local cheques are getting outdated as multicity chequebooks are replacing them rapidly.
- Outstation (Multicity Cheque): These are the cheques that can be presented outside the city limits. These cheques can be encashed at any place in the respective branch.
- At Par Cheque: These cheques are accepted all across the country in the branches of the respective bank. These cheques are highly useful for making safe outstation payments.
- Traveller’s Cheque: Traveller’s cheques are used for withdrawing money while travelling. These are a better option than carrying cash while you are on the move as you can comfortably travel without carrying a huge amount. These cheques can be carried at places where foreign currency is acceptable. Reputed hotel chains and foreign banks usually accept these cheques.
- Crossed Cheque: A crossed cheque is the one which is crossed with two parallel lines on the top left corner. This cheque is only paid to the person whose name is mentioned on the cheque and the funds are directly transferred to his/her account. Crossed cheques are safer than most kinds of cheques as the issuer can easily find out the person in whose account the funds are deposited.
- Uncrossed Cheque: Cheques that are not crossed with two parallel lines on the top left corner are uncrossed cheques. These cheques are also called open cheques as there are no instructions of transferring the funds into the payee’s account.
- Order Cheque: A cheque becomes an order cheque when you strike out the ‘bearer’ part or specify the party’s name. Despite not having any ‘cross’ marks the cheque is only payable to the specific person or the company.
- Mutilated Cheque: This is a unique type of cheque in Indian financial system. A mutilated cheque is torn at specific places and the payment is only made after the confirmation of the issuer. A mutilated cheque is usually torn at a corner containing all the required information such as payee name, amount, signature, and clearly visible MICR.
Why People Use Cheques?
Despite digital banking being so popular and handy, different types of cheques still hold their importance. Cheques are a good way to physically carry a significant amount of money which is not possible in any other way. In the case of a misunderstanding or fraud, carefully prepared cheques can always be tracked easily. This is because cheques are a physical evidence of making a payment. As soon as your cheque is deposited in the bank, it directly goes into the database and kept secure for some time for future reference. On the contrary, in any other form of payment such as digital payments or cash payments, there is no accessible physical evidence. Digital payments can be tracked but this requires special permissions from the authorities and that is not possible in most scenarios.