What is Cheque? Know the Types, Cancellation and How to Request for a Cheque Book

In the digital era where online transactions dominate, cheques remain a cornerstone of financial transactions in India. According to a 2023 report by the Reserve Bank of India (RBI), over 5.2 billion cheque transactions were recorded in India, underscoring their continued relevance in both personal and corporate finance. Whether it’s paying salaries, settling utility bills, or conducting high-value transactions, cheques provide a secure, reliable, and tangible mode of payment. In this comprehensive guide, we’ll explore everything about cheques—from their definition and types to their importance and how they work.

What is a Cheque?

A cheque is a written order directing a bank to pay a specific amount of money from the account holder’s account to the individual or entity mentioned in the cheque. Each cheque includes key identifiers such as the MICR (Magnetic Ink Character Recognition) code, which facilitates secure processing, and the IFSC (Indian Financial System Code), which identifies the issuing bank branch in electronic transactions. Cheques have played a massive role in bringing cashless transactions in India – way before the advent of Mobile Banking and Internet Banking - and is widely used for both personal and professional purposes.

Key Terminologies in a Cheque

• Drawer: The person or entity writing the cheque.
• Payee: The individual or organisation receiving the payment.
• Drawee: The bank or financial institution responsible for processing the cheque.

Features of a Cheque

• Unconditional Order: A cheque represents a mandate to the bank to pay the specified amount without any attached conditions.
• Must Be Signed and Dated: To be valid, a cheque must carry the signature of the drawer and a date.
• Account Specific: Only account holders with Savings, Current, or Overdraft accounts can issue cheques.
• Non-Alterable: Once written, the payee’s name and amount cannot be altered.
• Demand Payment: Cheques are payable on demand and do not require prior notice to the bank.
• Transaction Type: The transaction should be an account-to-account transfer or via cash.
• Validity: Any unsigned cheque will be considered invalid. 

What is the Validity of a Cheque?

A cheque is valid for three months from the date it is issued. After three months, a cheque is considered stale and cannot be cashed. 

• Post-dated Cheques: A post-dated cheque is valid for three months from the date written on the cheque. For example, if a post-dated cheque is issued for January 1, 2024, it can only be used until March 31, 2024.  
• Banker's Cheques: Banker's cheques are valid for three months and are issued by the bank on behalf of an account holder. They are non-negotiable instruments and cannot be dishonoured by the bank.

How to Fill a Cheque Correctly?

Filling a cheque accurately ensures its validity and prevents rejection. Follow these steps:

1. Date: Write the date in the DD/MM/YYYY format. For example: if the date is 15 November 2024, it should be written as 15/11/2024.
2. Payee Name: Enter the recipient’s name without leaving unnecessary spaces.
3. Amount in Words: Write the amount in words, ending with “ONLY” to avoid tampering. Example: ₹1.5 lakh should be written as One Lakh Fifty Thousand Only. 
4. Amount in Numbers: Fill the numerical value in the box provided with /- at the end, aligning it to the left to prevent alterations. ₹1,50,000/-
5. Signature: Use the same signature registered with your bank to validate the cheque.

Types of Cheques in India

1. Bearer Cheque

• Can be encashed by anyone holding the cheque.
• Requires no identity verification.
• Commonly used for petty transactions but considered less secure.

2. Order Cheque

• Payable only to the individual or entity specified.
• Requires identity verification of the payee.
• Offers enhanced security compared to bearer cheques.

3. Crossed Cheque

• Contains two parallel lines on the top left corner with “Account Payee” written between them.
• Can only be deposited into the payee’s bank account.
• Considered the safest form of cheque.

4. Post-Dated Cheque

• Issued with a future date.
• Payable only after the mentioned date.
• Commonly used for loan repayments or rent payments.

5. Stale Cheque

• Becomes invalid if not presented within three months of the issuance date.
• Requires revalidation or a new cheque for processing.

6. Blank Cheque

• Signed by the drawer but lacks the amount and payee details.
• Requires caution as it can be misused if mishandled.

7. Traveller’s Cheque

• Used internationally for safe fund transfer and purchases.
• Can be replaced if lost or stolen.

8. Banker’s Cheque

• Issued by the bank on behalf of the customer.
• Non-negotiable and commonly used for high-value transactions.

9. Open Cheque

• The cheques can be encashed or deposited at any bank and are payable to the cheque bearer.
• The drawer should sign at the front and back of the cheque.
• The term ‘Open’ should not be crossed off.
• Open cheques can be transferred to a different payee by the original payee.

How to Cancel a Cheque?

To cancel a cheque:

• Draw two parallel lines across the cheque.
• Write “CANCELLED” between the lines.
• Do not sign the cancelled cheque, as it’s used only for verification purposes.

Steps to Request a New Chequebook

• Via Mobile Banking: Log in to your bank’s app and request a chequebook.
• Internet Banking: Access your online banking account and apply for a new chequebook.
• ATM: Use your debit card to request a chequebook at your bank’s ATM.
• Branch Visit: Visit your nearest bank branch to place a request.
•  

As an alternative, you can also write to the bank requesting a chequebook. You can use the below format:

• Your address
• Date
• Bank address
• Salutation
• Subject
• Body – requesting cheque book
• Signature

What is Cheque Leaf?

The cheque book consists of a host of individual cheques. Each of these cheques is commonly referred as cheque leaf.

Common Mistakes to Avoid While Using Cheques

• Leaving blank spaces in the payee or amount fields.
• Overwriting or altering details.
• Using an inconsistent signature.
• Folding or stapling the cheque.
• Forgetting to cross a cheque for secure transactions.