Bank Cheques-Few things you must know

Today I will make you familiar with the few basic things about cheque transactions which may be helpful you in dealing through cheque. Including me lot of people these days familiar with making financial transactions through ATMs or online. But knowing about cheque transactions is also important as in few cases you need to write cheques too. So know these below mentioned things which I think are very important.

1) Validity of Cheque-Till now it is 6 months for Cheques/Drafts/Pay Order but this is going to be change from April 1st 2012 to 3 months only.

2) Cheque Truncation-This is new process implementation by RBI to mitigate physical loss of cheques and frauds. Definition of  it as per RBI is “Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point with the presenting bank en-route to the drawee bank branch. In its place an electronic image of the cheque is transmitted to the drawee branch by the clearing house, along with relevant information like data on the MICR band, date of presentation, presenting bank, etc. Cheque truncation thus obviates the need to move the physical instruments across branches, other than in exceptional circumstances for clearing purposes.”  This system is called Cheque Truncation System or CTS. It is highly beneficial for customers to reduce the frauds.

Hence instruction given by RBI is “Banks / Customers should use “CTS 2010” cheques which are not only image friendly but also have more security features. Customers may request their banks for cheque forms that are compliant with the “CTS 2010″ standard. They should preferably use dark coloured ink while writing cheques and avoid any alterations / corrections thereon. A new cheque should be used in the event of any alterations / corrections. Banks should exercise care while stamping the cheque forms, so that it does not interfere with the material portions such as date, payee’s name, amount and signature. The use of rubber stamps, etc, should not overshadow the clear appearance of these basic features in image. It is necessary to ensure that all essential elements of a cheque are captured in an image during the scanning process and banks / customers have to exercise appropriate care in this regard.” You will get CTS 2010 standard cheques from April 2012.

3) Writing with post dated cheque-This habit may force you in trouble if you not properly track about the dates and due to insufficient funds cheques may get dishonored. Hence it is advisable to avoid such type of habit.

4) Alteration and Counter Sign-This is strictly not allowed by banks to avoid frauds. Hence before writing cheques make sure no alteration and not try to counter sign for that alteration.

5) What is Order Cheque and Bearer Cheque- Order cheque means amount should be paid to the particular person or entity whose name is written on cheque. But bearer cheque means the payment should be made to the person who holds the cheque.

6) Banker’s Cheque-Cheque drawn on Bank is called Banker’s Cheque. Bankers are guarantee in this case. It is exactly like DD but when issued in same city then Banks use Banker’s Cheque while for issuing other cities DD is used.

7) Missing Cheques-When you miss few cheque leaves from your cheque book then you need to inform your bank about this and use stop payment facility against the missing cheques.

8) Writing down Cheque details before giving it to someone-Write cheque no, date written on cheque and to whom it is issued with amount for your future reference.

Hope above points made you familiar with few new interesting things about cheque writing and it’s usage.