Types of Cheque and Demand Draft

Types of Cheque

At some point, we all have used the cheque to pay money to a particular person or an organization. It is a convenient way to do payment instead of carrying a bag of money and also that hurts a lot to pay cash on hand to someone. Today we are going to discuss the Cheque briefly.

  • Cheque – A cheque is a Negotiable Instrument that orders bank to pay a particular person/organization a certain amount of money.
  • Negotiable Instrument – Any Document that can be transferred from the holder party to the other party. In India, the entire Negotiable instrument comes under the negotiable instrument act of 1881.


SBI Cheque


In Cheque transaction, Three parties are involved.

  • PAYEE – The one who receives money
    ( Akshay More in Above case )
  • DRAWER – The one who is Owner
    (The one who pays the money, Arnav Wadhonkar in the above case )
  • DRAWEE – Bank ( SBI in the above case )

Types of Cheque

  • Bearer Cheque – Payable to the person specified or any other person who presents it to the bank. A bearer cheque is a type of cheque in which there are no crossings on it however, such cheques are risky, this is because if such cheques are lost, the finder of the cheque can collect payment from the bank.
  • Order Cheque – Cheque is payable to a specific person only. ‘order’ cheque is paid with an identification of the receiver of the cheque amount.
  • Crossed Cheque – It can be credited directly to the bank account. Any cheque which cannot be encashed at the cash counter but only can be deposited into the account of the beneficiary and get credited to the account through cheque clearing system is called a crossed cheque
  • Antedated Cheque – If a cheque bears a date earlier than it is presented to the bank. Such cheque is not honoured.
  • Post Dated Cheque – Cheque bears a future date. The Cheque gets honoured after the date mentioned on the Cheque.
  • Stale Cheque – If the Cheque is presented after the validity of the cheque. The validity of the cheque is 90 days.

Bouncing of the cheque – the cheque is like a post-paid instrument where a person with a cheque can draw money once it is presented. Cheque issuer’s account will be debited once it is presented. One may not have enough balance at the time he issues a cheque. Hence sometimes because of insufficient balance in account cheque may be returned which is commonly called as cheque bounce.

Demand Draft

  • A demand draft (DD) is a negotiable instrument issued by a bank.
  • Demand draft is a prepaid instrument.
  • One can issue demand draft only when he pays the value of the DD in a bank. So a person when presents DD in a bank will definitely get money.
  • There will be no chance of bouncing here as money is already paid for that DD by issuer

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