Writing a cheque seems to be a simple task, but remember, issuing a cheque to a person is equivalent to payment of cash and we find frauds related to cheque are very common. Therefore, no need to mention that writing a cheque in right way is crucial to avoid misuse or dishonor of cheque issued by us.
There may be over 90 technical reasons for cheque returns. However, commonly cheques are returned with the following 6 reasons.
- Stale or expired cheque/Postdated cheque.
- Amount in words and figures does not tally.
- Insufficient funds.
- Alteration in the cheque.
- Signature of the drawer (account holder) does not tally with the specimen available with the bank.
- Cheque is returned at processing centre for the following reasons (a). Written or signed on the CODE Line, (b). Pin or stapled on the CODE Line, (c).Pasted on the CODE Line, (d). Folded the cheque on the CODE Line, (e). Affixed Rubber stamps on the CODE Line.
Write the right date
A cheque bearing a date older than three months is known as ‘stale cheque or expired cheque’. The cheque will be returned by the bank if it is presented after the expiry date. When a cheque bears a future date it is called ‘postdated cheque. The Postdated cheque indicates that it is due for payment only after the date written on the cheque. If the cheque is presented for payment before the date mentioned in the cheque, it will be returned with the reason ‘postdated cheque’.
Write the right name of the payee
Succeeding the date row, the next row begins with the word ‘PAY’ and ends with the word OR BEARER. The vacant space between the word PAY and the word OR BEARER is meant for writing the payee’s name. You have to write the Payee’s (beneficiary’s) name correctly without leaving space. (For example a Cheque issued in the name of ARUN may be changed as KARUN and gets it collected by Karun to his account).Draw a line after the name is written so that the Payee’s name cannot be changed by the holder of the cheque.
Bearer or Order
When the word BEARER is cut by a stroke of line, the instrument becomes order cheque. The Bearer cheque means a person in possession of a cheque which is payable by the drawee bank to the bearer of the cheque. The ‘Order cheque’ means the payment of that cheque will be made by the bank only to ‘Payee’ or to a person to whom payee has endorsed to collect the payment and not to the bearer.
Write the right amount
The following two lines after PAY row, the new row start with the word RUPEES with blank space for writing the amount in words payable and followed by a rectangle box at the right end of lines. This box is meant for filling in the amount payable in figures. The amount written in words is called ‘legal amount’ of the cheque and amount written in figures is called ‘courtesy amount’. Legally speaking, where there is a difference between words and figures expressed in a cheque, the amount in words is the amount payable as per section 18 of N.I.Act 1881. However, banks normally return the cheque with a remark ‘amount in words and figure differs’, may be giving an opportunity to the customer to recheck the actual amount payable by him/her. You have to write the amount correctly both in words and figures without leaving space. Do not leave space either at the beginning or at the end of amount written in words or figure to avoid scope to the holder of the cheque to modify the amount written. Draw a line on the vacant space so that nobody can change the amount written by you.
Cheques returned for insufficient funds
A cheque returned for lack of enough funds is too bad, but such incidents may occur to anyone unintentionally. For example, you have issued a cheque to Insurance Company towards annual premium after verifying sufficient balance available in your account. But the cheque was returned by your bank with the reason ‘insufficient funds’. This can be happened when one of the cheque issued by you at an earlier date which you have forgotten was presented to the bank after you have issued the cheque to Insurance Company. So it is vital to note down the cheque numbers and date of all the cheques issued by you and find out whether all the cheques issued earlier are paid or not and then arrange the funds in the account if necessary for issuing fresh cheques.
No alteration /correction allowed
One of the mandatory features of the CTS (Cheque Truncation System), prescribed by RBI is that no changes / corrections should be carried out on the cheques (other than for date validation purposes, if required). For any change in the payee’s name, courtesy amount (amount in figures) or legal amount (amount in words), etc., fresh cheque forms should be used by customers. This would help banks to identify and control fraudulent alterations.
Signature should be always uniform
Underneath the rows kept for writing amount in words and figures, we find vacant space which is reserved for account holder to sign. One has to take care that his/her cheques are always same and it should be as per specimen signature provided to the bank.
CODE line
Underneath the space provided for drawer’s (Account holder) signature, you find code line. The code line in a cheque is the clear White Band portion at the bottom of the cheque which is exclusively meant for MICR (Magnetic Ink Code Recognition) code numbers to facilitate mechanized cheque processing. In the code line first group of 6 digit indicates the cheque number, second group of 6 digits indicate the bank code city code branch code in cheque processing centre and next group of 2 digits like 10, 11,12 and so on indicates the type of instrument like SB, Current account, CC account etc. The code line should not be disturbed to avoid rejection of cheque at processing centre.
