CHEQUE
A cheque refers to a negotiable instrument that contains an unconditional order to the bank to pay a certain sum mentioned in the instrument, from the drawer’s account to the
person to whom it is issued, or to the order of the specified person or the
bearer.
Parties to Cheque
Basically, there are three parties to a cheque:
·
Drawer: The person who draws the cheque,
i.e. signs and orders the bank to pay the sum.
·
Drawee: The bank on which the cheque is
drawn or who is directed to pay the specified sum written on the cheque.
·
Payee: The beneficiary, i.e. to whom the amount is to be paid.
Apart from these three, there are two
more parties to a cheque:
·
Endorser: When a party transfers his right to
take the payment to another party, he/she is called endorser.
·
Endorsee: The party in whose favor, the
right is transferred, is called endorsee.
Sometimes, the drawer and payee can
be the same person, when the drawer writes a self-cheque.
Types of Cheque
1. Open Cheque: Otherwise called an uncrossed cheque, when a cheque is not crossed and payable at the counter of the bank on presentation of the bank
Bearer Cheque: In this type of cheque the person who bears the cheque is authorized to collect the amount of money. this type of cheque is a bearer cheque.
Order Cheque: In these types of cheques only that person whose name is written (by the issuer) on the cheque is authorized to collect the amount.
crossed Cheque: if any two parallel lines are made on the front part of the cheques which may or may not have the words – & Co., A/c payee, or Non-Negotiable. Such cheques are regarded as crossed cheques. The amount on such cheques is credited to the account of the payee.
Self Cheque: A self-cheque is a cheque is written by the drawer as pay self to receive the money in the physical form from the branch where he holds his account.
Blank Cheque: A cheque that is only signed, but the name of the payee and date is not indicated, is called a blank cheque. Such cheques can be made account payee, and the maximum limit of withdrawal can be mentioned.
Stale Cheque: A cheque bears a date and is valid up to three months of the stated date. If a cheque is presented before the bank, after the expiry of the reasonable period, i.e. three months after the date, then it is called a stale cheque.
Post-Dated Cheque: When a cheque is drawn containing a future date, it is called a post-dated cheque. In such cases, money will not be payable by the bank before that date.
Ante-dated Cheque: A cheque containing a prior date, is called an ante-dated cheque. Bank honors cheques until three months to the date mentioned.
Banker’s Cheque: Otherwise called a pay order, it is a non-negotiable instrument, which is issued by the bank on behalf of the customer, which is payable in the same city.
Canceled Cheque: Due to any kind of mistakes while writing the cheque, it is canceled, and so it is called a canceled cheque.
Mutilated Cheque: A cheque that is torn, damaged, crushed or washed, is called a mutilated cheque. Such cheques are honored only when certain details are visible, after confirming with the drawer.
Traveler cheque: A cheque issued by a bank for a fee, containing a fixed amount. These cheques are enchased or used to make payment in a foreign country, after endorsement by the signature of the holder.
Gift Cheque: Cheques that are used for the purpose of gifts and prizes, usually very large in size, are called Gift Cheques. Banks charge a fee for issuing such cheques.
TRUNCATED
CHEQUE
Cheque truncation (check truncation in American English) is a cheque clearance system
that involves the digitalization of a
physical paper cheque into a substitute electronic form for
transmission to the paying bank. The process of cheque clearance, involving
data matching and verification is done using digital images instead of paper
copies.
Cheque truncation reduces or eliminates the physical movement of paper cheques and reduces the time and cost of cheque
clearance. Cheque truncation also offers the potential reduction in settlement
periods with the electronic processing of the cheque payment system
The definition of truncated cheque in under
in Section 6 of the Negotiable instruments act 1881
It means a cheque that is truncated during
the course of a clearing cycle
It is truncated either by the clearinghouse
or by the bank, whether paying or receiving payment immediately on a generation of
an electronic image for transmission, substituting the further physical movement
of cheque in writing.
Benefits of Cheque Truncating System
1. The speed of the cheque
clearance process has been increased manifold since there is no need for the
physical transfer of cheques between the banks.
2. As there is no physical movement of cheques from one bank to the other, there is no fear of
loss of cheque due to mishandling by either bank.
3. The Cheque Truncation system has helped the banks to have a superior verification and an effective
reconciliation process.
4. The CTS system has
eradicated the geographical restrictions as to the jurisdictions. Earlier the
clearance was restricted to the banks operating within the restricted
geographical area, but now with this system, the cheques were even drawn on
upcountry banks can be cleared electronically with ease.
5. The CTS-compliant
cheques are prone to fewer frauds and hence are more secured than the old
cheques.
ELECTRONIC CHEQUE
An electronic check, or
e-check, is a form of payment made via the Internet, or another data network,
designed to perform the same function as a conventional paper check. Since the
check is in an electronic format, it can be processed in fewer steps.
Additionally, it has more
security features than standard paper checks including authentication public key. cryptography, digital signatures, and encryption, among
others.
BENEFITS
OF E-CHEQUE
TO
CUSTOMERS;
No physical movement of
cheques so no fear of loss of cheque in transit.
Quicker clearance; within 3-4
working days.
It is more secured than
physical cheques.
Decrease errors and fraud.
cheques reduce the potential for errors and fraud because fewer people handle
them.
They can serve corporate
markets. Firms can use them in a more cost-effective manner
Benefits to Bank
Reduce the risk associated
with paper clearing
Superior verification
and reconciliation process
No geographical
restrictions
No physical movement
of cheques- it saves cost and time for banks.
No chance of cheque
dishonor- The risk is taken care of by the accounting server, which will
guarantee that the cheque would be honored.
VARIOUS FORMS OF E-BANKING:
· 1.
INTERNET BANKING:
Internet Banking helps you manage many banking transactions
online via your PC.
AUTOMATED TELLER MACHINES (ATM):
An automated teller machine or automatic teller machine
(ATM) is an electronic computerized telecommunications device that allows a
financial institution’s customers to directly use a secure method of
communication to access their bank accounts, order or make cash withdrawals (or
cash advances using a credit card) and check their account balances without the
need for a human bank teller.
· 2. TELEBANKING:
By dialing the given Telebanking number through a landline
or mobile from anywhere, the customer can access his account and by following
the user-friendly menu, entire banking can be done through Interactive Voice
Response (IVR) system.
· 3. SMART CARD:
A smart card usually contains an embedded 8-bit
microprocessor (a kind of computer chip). The microprocessor is under a contact
pad on one side of the card. Think of the microprocessor as replacing the usual
magnetic stripe present on a credit card or debit card.
The microprocessor on the smart card is there for security.
The host computer and card reader actually “talk” to the microprocessor. The
microprocessor enforces access to the data on the card.
The chips in these cards are capable of many kinds of
transactions.
· 4. DEBIT CARD:
Debit cards are also known as check cards. Debit cards look
like credit cards or ATM (automated teller machine) cards but operate like
cash or a personal check. Debit cards are different from credit cards. While a
credit card is a way to “pay later,” a debit card is a way to “pay now.” When
you use a debit card, your money is quickly deducted from your checking or
savings account.
·
E-CHEQUE:
An e-Cheque is an electronic version or representation of
paper cheque.
Today, modern banking systems exist in the following
models and systems of electronic banking:
• Home Banking
• Office Banking
• Online Banking
• Internet Banking
• Mobile Banking
• Telephone Banking
• SMS Banking
ELECTRONIC BANKING MODELS
• Home Banking is
used for banking services in the home without a physical presence in the bank
using telecommunications link - a digital voice technology, TV, PC computer
system and IVRs. Systems, i.e. home banking models appeared in the U.S. in
mid-eighties of the twentieth century and its development was guided by
telecommunications links between the banking information system and the clients
of the bank, such as telephone banking, online banking, Internet banking and
mobile banking.
• Office Banking is a model based on the principle of
banking from home where staff in the business system through their computer
systems (terminals) can use banking services. Modern banking systems to their
clients provide a cash flow management system and a complete portfolio of
business systems (processing all financial transactions, online cash report
presentation, online payment accounts, budgeting, and financial control,
low-cost hardware support, etc)
• Online banking is
method of work base on direct and flexible communication (24 hours) between the
bank and the client's computer system that is running special software
(Microsoft Money, Manage Your Money, CornicheNet, etc).
• Internet banking or cyberbanking has more users directly
from home who perform financial transactions over the Internet, due to speed,
efficiency, and effectiveness of the execution of transactions. Modern banks
through Internet Banking provide its clients (individuals and legal entities)
around the world throughout the whole year (365 days) 2/7 services and
financial transactions.
• Mobile banking is a new trend in electronic banking where the client is using modern mobile phones
(J2ME mobile phones, Blackberry, Windows Mobile, Android, iPhone, and iPad),
personal digital assistants (PDAs), palmtop computers, and mobile computing
systems over Internet and WAP standards may at anytime and anywhere in a safe
and quick way to perform the following banking operations
• Telephone banking is a service that allows customers a faster, easier, and simpler way of performing banking transactions over the
phone.
• SMS Banking is a banking service by which the bank
provides accurate and reliable information to clients about the status and
changes of their accounts via mobile phones.
CCS
CLUSTER APPROACH
A cluster-based approach to lending is intended
to provide a full-service approach to cater to the diverse needs of the MSE the sector which may be achieved through extending banking services to recognized
MSE clusters. A cluster-based approach may be more beneficial
(a)in dealing with well-defined and recognized
groups
(b) availability of appropriate information for
risk assessment
(c)
monitoring by the lending institutions and
(d) reduction in costs. The banks have,
therefore, been advised to treat it as a thrust area and increasingly adopt the
same for SME financing.
United
Nations Industrial Development Organisation (UNIDO) has identified 388 clusters
spread over 21 states in various parts of the country. The Ministry of Micro,
Small and Medium Enterprises has also approved a list of clusters under the
Scheme of Fund for Regeneration of Traditional Industries (SFURTI) and Micro
and Small Enterprises Cluster Development Programme (MSE-CDP) located in 121
Minority Concentration Districts. Accordingly, banks have been advised to take
appropriate measures to improve the credit flow to the identified
clusters. Banks have also been advised that they should open more MSE
focused branch offices at different MSE clusters which can also act as
counseling.
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