Rules of Issuing a Cheque

Rules of issuing a cheque

If the drawer makes the cheque properly and if the balance of the drawer at the bank permits, the bank must pay the amount of cheque as soon as it is presented. If the drawer does not make the cheque properly, the bank rejects payment. Hence, to make the cheque properly, the following points or rules must be considered: -

1. Date
   The date should be mentioned on the cheque properly. The cheque should not be more than three months old or it should not contain future date or else the bank will not pay the amount.
   
   
2. Name of the payee
   The name of the payee should be mentioned in the cheque correctly.
   
   
3. Amount of the cheque
   The amount of the cheque should be mentioned both in words and figures clearly. The amount written in words should tally with the amount written in figures.
   
   
4. Signature

   

   
   The drawer should sign the cheque properly. The signature given on the cheque should tally with the signature given on the signature specification card. The signature specification card is kept by the bank. The drawer should prove by giving his signature for any alteration of the cheque.
   
   
5. Account number
   The drawer should mention his account number clearly and correctly.
   
   
6. Minimum balance
   The amount mentioned on the cheque should not be more than the amount deposited in the bank. Besides it, a certain amount of minimum balance should always be there in the account as per the rule of the bank.
   
   
7. Endorsement
   The order and crossed cheques should be transferred by the proper endorsement and delivery, otherwise, the amount of cheque will not be paid by the bank.
   
   
8. Crossing and overwriting
   There should not be any crossing and overwriting on the cheque.
   
   
9. Condition of the cheque
   It should be in proper condition. If the cheque is torn, wetted and spotted, it will not be acceptable to the bank.

Dishonour of cheque

The bank should pay the amount mentioned on the cheque as soon as it is presented. If the bank pays the amount of the cheque to the payee, the cheque is said to be honoured. If the bank refuses to pay the amount of cheque, the cheque is said to be dishonoured. Thus, the dishonour of the cheque means the refusal made by the bank to pay the amount of the cheque to the payee. It is a condition in which the bank does not pay the amount of the cheque to the payee. In fact, when the drawer draws the cheque without following the rules of issuing the cheque, the bank dishonours the cheque.

The following are some important reasons of dishonouring a cheque: -

1. If the date is not written or written incorrectly or the date is more than 90 days old or the advance date is given.
2. If the name of the payee is not written or written unclearly.
3. If the order or crossed cheques are transferred without proper endorsement and delivery.
4. If the amount is not written in words and figures or written incorrectly or the amount written in words and figures does not match with each other.
5. If the alteration made on the cheque is not proved by the drawer giving signature.
6. If the account number is not mentioned or unclear or mentioned incorrectly.
7. If the signature is not given or the signature given on the cheque does not match with the signature given on the ‘signature specification card'.
8. If the amount mentioned on the cheque is more than the amount that the drawer has in his bank account or the minimum balance in the account cannot remain.
9. If the cheque is overwritten.
10. If the cheque is not found in proper condition or found wetted, torn or spotted.
11. If the drawer has given order to the bank to stop payment of the cheque.
12. If the bank has got the information regarding the death or insolvency or lunacy of the drawer or depositor.
13. If the court of law orders the bank to stop the payment of the cheque.
14. If the drawer has closed his account before presenting the cheque.

Endorsement of cheque

A cheque is a negotiable instrument. The ownership of the cheque is transferable. A bearer cheque can be transferred by mere delivery. It does not require endorsement. But an order cheque and crossed cheque except account payee cheque can be transferred only by proper endorsement and delivery. The endorsement is the act of giving signature usually on the back of the cheque for the purpose of transferring it to somebody else. While making the payment, the bank should identify both first and second payees. Any subsequent holder can make the endorsement. The person making the endorsement for the purpose of passing on the cheque to another person is called endorser and the person to whom it is passed or transferred is called endorsee.

Computerised Payment System of Cheque

The modern age is the age of information technology. Information technology helps in performing official activities in an efficient manner. Nowadays, banking transactions are also performed through the computerised system. A bank operates its branches at different locations of the country. Due to the computerised system of the bank, a customer can deposit and withdraw an amount from any branch bank. The bank collects such information and maintains the accounts of the transactions with the help of the computerised networking system.

The joint venture banks, as well as other banks, have adopted computerised networking system. Due to the installation of computerised networking system, these banks are giving banking services efficiently to their clients. In order to provide efficient banking services and satisfaction to the customers, today all banks require adopting computerised payment system. Hence, the computerised payment system has gained much popularity in the banking sector.