Bank Meterial

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A cheque (orcheckinAmerican English) is a document[nb 1]

that orders a payment ofmoney

from a bank account. The person writing the cheque, thedrawer, usually has acurrent account(most English speaking countries) orchecking account(US) where their money was previously

deposited. Thedrawerwrites the various details including themonetaryamount, date, and a

payeeon the cheque, and signs it, ordering theirbank, known as the drawee, to pay that personor company the amount of money stated.

Cheques are a type ofbill of exchangeand were developed as a way to make payments without

the need to carry large amounts of money. Whilepaper moneyevolved frompromissory notes,

another form of negotiable instrument, similar to cheques in that they were originally a written

order to pay the given amount to whoever had it in their possession (the "bearer").

Technically, a cheque is anegotiable instrument

[nb 2]

instructing afinancial institutionto pay aspecific amount of a specificcurrencyfrom a specifiedtransactional accountheld in the drawer'sname with that institution. Both the drawer and payee may benatural personsorlegal entities.

Specifically, cheques are order instruments, and are not in general payable simply to the bearer

(asbearer instrumentsare) but must be paid to the payee. In some countries, such as the US, thepayee may endorse the cheque, allowing them to specify a third party to whom it should be paid.

Although forms of cheques have been in use since ancient times and at least since the 9thcentury, it was during the 20th century that cheques became a highly popular non-cashmethod

for makingpaymentsand the usage of cheques peaked. By the second half of the 20th century, as

cheque processing became automated, billions of cheques were issued annually; these volumes

peaked in or around the early 1990s.

[1]

Since then cheque usage has fallen, being partly replacedby electronic payment systems. In some countries like Poland cheques have become a marginal

payment systemor have been phased out completely.
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What is a Cheque ? Definition - Kinds and

Types of Cheques

Post : Gaurav Akrani Date : 2/09/2011 11:02:00 AM IST

Comments (2) Labels : Banking

What is a Cheque ? Meaning Cheque is an important negotiable instrument which can be transferred by mere handdelivery. Cheque is used to make safe and convenient payment. It is less risky and the

danger of loss is minimised.

Definition of a Cheque

"Cheque is an instrument in writing containing an unconditional order, addressed to a banker,

sign by the person who has deposited money with the banker, requiring him to pay on demand a

certain sum of money only to or to the order of certain person or to the bearer of instrument."

Different Kinds / Types of Cheques 1. Bearer Cheque

When the words "or bearer" appearing on the face of the cheque are not cancelled, the cheque is

called a bearer cheque. The bearer cheque is payable to the person specified therein or to any

other else who presents it to the bank for payment. However, such cheques are risky, this isbecause if such cheques are lost, the finder of the cheque can collect payment from the bank.

2. Order Cheque

When the word "bearer" appearing on the face of a cheque is cancelled and when in its place the

word "or order" is written on the face of the cheque, the cheque is called an order cheque. Such a

cheque is payable to the person specified therein as the payee, or to any one else to whom it is

endorsed (transferred).

3. Uncrossed / Open Cheque:-

When a cheque is not crossed, it is known as an "Open Cheque" or an "Uncrossed Cheque". The

payment of such a cheque can be obtained at the counter of the bank. An open cheque may be abearer cheque or an order one.
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4. Crossed Cheque

Crossing of cheque means drawing two parallel lines on the face of the cheque with or without

additional words like "& CO." or "Account Payee" or "Not Negotiable". A crossed chequecannot be encashed at the cash counter of a bank but it can only be credited to the payee's

account.

5. Anti-Dated Cheque

If a cheque bears a date earlier than the date on which it is presented to the bank, it is called as

"anti-dated cheque". Such a cheque is valid upto six months from the date of the cheque.

6. Post-Dated Cheque

If a cheque bears a date which is yet to come (future date) then it is known as post-dated cheque.A post dated cheque cannot be honoured earlier than the date on the cheque.

7. Stale Cheque

If a cheque is presented for payment after six months from the date of the cheque it is called stale

cheque. A stale cheque is not honoured by the bank.

What is a Bank ? Introduction

Finance is the life blood of trade, commerce and industry. Now-a-days, banking sector acts as the

backbone of modern business. Development of any country mainly depends upon the bankingsystem.

The term bank is either derived from old Italian word banca or from a

French word banque both mean a Bench ormoney exchange table. In olden days, Europeanmoney lenders or money changers used to display (show) coins of different countries in big

heaps (quantity) on benches or tables for the purpose of lending or exchanging.

What is a Bank ? Introduction, Definition

and Features of Bank

What is a Bank ? Introduction
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Finance is the life blood of trade, commerce and industry. Now-a-days, banking sector acts as the

backbone of modern business. Development of any country mainly depends upon the banking

system.

The term bank is either derived from old Italian word banca or from a French word banque both

mean a Bench ormoney exchange table. In olden days, European money lenders or moneychangers used to display (show) coins of different countries in big heaps (quantity) on benches or

tables for the purpose of lending or exchanging.

A bank is a financial institution which deals with deposits and advances and other related

services. It receives money from those who want to save in the form of deposits and it lends

money to those who need it.

Definition of a Bank

Oxford Dictionary defines a bank as "an establishment for custody of money, which it pays outon customer's order

1. Dealing in Money

Bank is a financial institution which deals with other people's money i.e. money given bydepositors.

2. Individual / Firm / Company

A bank may be a person, firm or a company. A banking company means a company which is in

the business of banking.

3. Acceptance of Deposit


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A bank accepts money from the people in the form of deposits which are usually repayable on

demand or after the expiry of a fixed period. It gives safety to the deposits of its customers. It

also acts as a custodian of funds of its customers.

4. Giving Advances

A bank lends out money in the form of loans to those who require it for different purposes.

5. Payment and Withdrawal

bank provides easy payment and withdrawal facility to its customers in the form of cheques anddrafts, It also brings bank money in circulation. This money is in the form of cheques, drafts, etc.

6. Agency and Utility Services

A bank provides various banking facilities to its customers. They include general utility servicesand agency services.

7. Profit and Service Orientation

A bank is a profit seeking institution having service oriented approach.

8. Ever increasing Functions

Banking is an evolutionary concept. There is continuous expansion and diversification as regardsthe functions, services and activities of a bank.


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9. Connecting Link

A bank acts as a connecting link between borrowers and lenders of money. Banks collect money

from those who have surplus money and give the same to those who are in need of money.

10. Banking Business

A bank's main activity should be to do business of banking which should not be subsidiary to any

other business.

Different Modes or Types of Payment

The payment can be made in many different ways like by giving Cash, doing Telegraphic

Transfer or Mail Transfer, via Money Order or Postal Order, Bill of Exchange, Promissory Note,Cheque, Bank Draft, etc.

1. Cash Payment

This is one of the oldest modes of payment. In this case, the buyer pays money in the form ofnotes and coins to the seller. The seller on receipt of cash, issues cash memo or cash receipt. This

mode of payment is suitable only for small transactions.
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2. Telegraphic Transfer or Mail Transfer

In this system, the payer deposits the money along with other charges in a bank which has abranch office at the payee's place. On receipt of cash and other charges, the bank telegraphically

informs the branch office to credit the amount to the payee's A/C. The payee is accordinglyinformed and can withdraw the money. The money can also be remitted by mail transfers, which

takes a little longer time. This method helps for quick remittance, but it is not a popular one.

3. Money Order or Postal Order

Payment can also be remitted through money orders and postal orders. Businessmen may prefermore of postal orders because a large number of postal orders can be collected and encashed at a

time. Postal order is safer than a money order. Postal orders can be crossed for safety purpose.

However, traders normally do not use this method of payment.

4. Bill of Exchange

According to the Section 5 of Indian Negotiable Instruments Act, 1881, "A bill of exchange is aninstrument in writing containing an unconditional order, signed by the maker, directing a certainperson to pay a certain sum of money only to, or to the order of, a certain person to the bearer of

the instrument."

Some Advantages of Bill of Exchange are :-

1. The holder of the bill can receive the money even before the due date of bill, bydiscounting the bill with his bank.

2. The bill can be transferred to another person.3. It enables the buyer to purchase the goods without making actual payment. He accept the

bill & make payment at a later date.

5. Promissory Note


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A promissory note is an instrument in writing (not being a bank note or e currency note)

containing an unconditional undertaking signed by the maker, to pay a certain sum of money

only to, or to the order of a certain person, or to the bearer of the instrument.

6. Cheque

Every businessman has a bank account to facilitate his business transactions. When the bank

account is opened, the bank gives a cheque book for making payments.chequepayment is aconvenient and safer mode of payment. To ensuresafetythe cheque may becrossedgenerally or

specially, so that the payment to a wrong person is prevented.

7. Bank Draft

ABank Draftis defined as "An order to pay money, drawn by one office of a bank upon another

office of the same bank for a sum of money payable to order on demand."

Bank drafts are often used for the purpose of transferring funds from one place to another within

a country or from one country to another.

A bank draft is an order given by one bank upon another of its branch bank situated elsewhere topay a certain sum of money.

The contents of bank draft is more or less that of a cheque, but it is signed not by the payer but

by the banker.

Type 1. Saving Banks

Saving banks are established to create saving habit among the people. These banks are helpful

for salaried people and low income groups. The deposits collected from customers are invested
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in bonds, securities, etc. At present most of thecommercial bankscarry the functions of savings

banks. Postal department also performs the functions of saving bank.

Image Credits crispyteriyaki

Type 2. Commercial Banks

Commercial banks are established with an objective to help businessmen. These banks collect

money from general public and give short-term loans to businessmen by way ofcash credits,overdrafts, etc. Commercial banks provide various services like collecting cheques, bill of

exchange, remittance money from one place to another place.

In India, commercial banks are established under Companies Act, 1956. In 1969, 14 commercialbanks werenationalisedby Government of India. The policies regarding deposits, loans, rate of

interest, etc. of these banks are controlled by the Central Bank.

Type 3. Industrial Banks / Development Banks
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Industrial / Development banks collect cash by issuing shares & debentures and providinglong-term loans to industries. The main objective of these banks is to provide long-term loans for

expansion and modernisation of industries.

In India such banks are established on a large scale after independence. They are Industrial

Finance Corporation of India (IFCI), Industrial Credit and Investment Corporation of India(ICICI) and Industrial Development Bank of India (IDBI).

Type 4. Land Mortgage / Land Development Banks

Land Mortgage or Land Development banks are also known asAgricultural Banks becausethese are formed to finance agricultural sector. They also help in land development.

In India, Government has come forward to assist these banks. The Government has guaranteed

the debentures issued by such banks. There is a great risk involved in the financing of agriculture

and generally commercial banks do not take much interest in financing agricultural sector.

Type 5. Indigenous Banks

Indigenous banks meansMoney Lenders and Sahukars. They collect deposits from generalpublic and grant loans to the needy persons out of their own funds as well as from deposits.These indigenous banks are popular in villages and small towns. They perform combined

functions of trading and banking activities. Certain well-known indian communities like

Marwaries andMultani even today run specialised indigenous banks.

Type 6. Central / Federal / National Bank

Every country of the world has a central bank. In India, Reserve Bank of India, in U.S.A,FederalReserveand in U.K,Bank of England. These central banks are the bankers of the other banks.They provide specialised functions i.e. issue of paper currency, working as bankers of

government, supervising and controlling foreign exchange. A central bank is a non-profit making

institution. It does not deal with the public but it deals with other banks. The principalresponsibility of Central Bank is thorough control on currency of a country.
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Type 7. Co-operative Banks

In India, Co-operative banks are registered under the Co-operative Societies Act, 1912. They

generally give credit facilities to small farmers, salaried employees, small-scale industries, etc.

Co-operative Banks are available in rural as well as in urban areas. The functions of these banksare just similar to commercial banks.

Type 8. Exchange Banks

Hong Kong Bank, Bank of Tokyo, Bank of America are the examples of Foreign Banks workingin India. These banks are mainly concerned with financing foreign trade.

Following are the various functions of Exchange Banks :-

1. Remitting money from one country to another country,2. Discounting of foreign bills,3. Buying and Selling Gold and Silver, and4. Helping Import and Export Trade.

Type 9. Consumers Banks

Consumers bank is a new addition to the existing type

of banks. Such banks are usually found only in

advanced countries like U.S.A. and Germany. The main

objective of this bank is to give loans to consumers for

purchase of the durables like Motor car, television set,

washing machine,furniture, etc. The consumers have torepay the loans in easy installments.

Definition of 'Money Laundering'


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The process of creating the appearance that large amounts of money obtained from serious

crimes, such as drug trafficking or terrorist activity, originated from a legitimate source.

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