Precautions Before Honouring A Cheque
In order to safeguard his position, the paying banker has to observe the following precautions before honouring a cheque.
(1) Presentation of Cheque
First of all a paying banker should note whether the presentation of the cheque is correct. It can be found out by noting the following factors.
(a) Type of Cheque: Cheques may generally be of two types – open or crossed. If it is open one, the payment may be paid at the counter. If it is crossed, the payment must be made only to a fellow banker.
(b) Branch: The paying banker should see whether the cheque is drawn on the branch where the account is kept.
(c) Banking Hours: The paying banker should also note whether the cheque is presented during the banking hours on a business day.
(d) Multination: If the cheque is from into pieces or cancelled or mutilated, then the paying banker should not honour it.
From of the Cheque
Before honouring a cheque, a banker shold see the form of cheque and find out whether it is regular or not.
(a) Printed Form: The customer should draw cheques only on the printed leaves supplied by the bankers failing which the banker may refuse to honour it.
(b) Enconditional Order: The cheque should not contain any condition
(c) Date: Before honouring a cheque, the paying banker must see whether there is a date on the instrument. if a cheque is ante dated, it may be paid if it has not exceeded six months from the date of its issue otherwise it will become stale one. If a cheque is post dated, he should honour it only on its due date.
(d) Amount: The paying banker should see whether the amount stated in the cheque both in words and figures agree with each other.
(e) Material Alteration: If there is any material alteration the banker should return it with a memorandum “Alteration requires drawer’s confirmation”.
(f) Sufficient Balance: If the funds available are not sufficient to honour a cheque, the paying banker is justified in returning it.
(g) Signature of the Drawer: It is the duty of the paying banker to compare the signature of his customer found on the cheque with that of his specimen signature.
(h) Endorsement: The banker must verify the regularity of endorsement, if any, that appears on the instrument.
(i) Legal Bar: The existence of legal bar like Garnishee order limits the duty of the banker to pay a cheque.