Precautions Before Honouring A Cheque

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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.

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  1. Syedpacha 2 years ago

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