Bank Cheque Rules: When and why is it necessary to sign on the back of a cheque? Every bank customer should know

In this era of digital banking, people mostly use online transactions, but even today many people prefer to pay by cheque. Many times people face problems due to not understanding the bank cheque rules. Especially due to lack of proper signing on the cheque, the cheque may bounce, which may lead to financial loss and legal action. Let us know about some important rules related to cheques.

Difference between bearer's cheque and order cheque

Whenever you issue a cheque to someone, it can be of two types – Bearer’s Cheque and Order Cheque.

Bearer's cheque:

• The name of the recipient is not written in this cheque, and whoever receives this cheque can withdraw money from the bank.
• It is mandatory to sign on the back of such a cheque.
• If the cheque is lost, anyone can deposit it in the bank and withdraw the money.

Order Check:

• The name of the recipient is clearly written in it.
• The bank makes payment only to the person whose name is mentioned on the cheque.
• There is no need to sign the back of the order cheque.

Why is signature required on the back of a bearer's cheque?

If a person uses a bearer's cheque and that cheque is lost or stolen, then anyone can encash it. Therefore, the bank asks to sign on the back of the bearer's cheque (Check Sign Rule).

• This makes it clear that the transaction has taken place with your consent.
• This makes the bank not responsible for any mistake.
• Many times, the bank also asks you to sign the back of the cheque for signature verification.

Rules for withdrawing large amount through bearer cheque

• If an amount more than ₹50,000 is being withdrawn through a bearer's cheque, the bank may ask for ID proof.
• If a third person goes to deposit the cheque, the bank may ask him to sign as well.
• If the signatures on the bearer's cheque do not match, the bank may reject it.

What happens if a cheque bounces?

• Cheque Bounce is a punishable offense in India. If a cheque bounces, the following penalties may apply:
• A penalty is levied by the bank when a cheque bounces for the first time.
• If the check bounces multiple times, legal action can be taken.
• If there is financial loss due to cheque bounce, the person who issued the cheque may also be jailed.

Keep these things in mind while paying by check

• Sign correctly:
• Sign the cheque in the same manner as is recorded in the bank's records.
• If the signatures do not match the cheque may bounce.
• Write the amount clearly:
• The amount written on the cheque must be clear.
• The amount written in figures and words must match.

Check the date before issuing the cheque:

If the date of the cheque is old (Stale Cheque), then the bank can reject it.

A post dated cheque cannot be encashed prematurely.

If you make payments through cheques, it is important to understand the rules related to cheques (Check Sign Rules). Know the difference between bearer cheques and order cheques and ensure that the signing process is correct. Even a small mistake can lead to cheque bounce, leading to financial loss and legal action. So, follow banking rules and make safe transactions.

Photo Credit: Cheque Rules