A Cheque leaf is a financial instrument that instructs a financial institution, such as a bank or non-banking financial institution (NBFI), to transfer the amount specified in the Cheque from the drawer’s account to the drawee’s account so that it can be deposited in the payee’s account. The person who has written the cheque is known as a Drawer. Click here to know about the Chai King Franchise.
A drawer has a transaction-enabled bank account through which the transaction is carried out. A Payee is the person who receives the funds specified in the Cheque. A Payee’s bank is referred to as a Drawee. Both the Drawer and the Payee can be individuals or entities such as corporations.
What does A Cheque Leaf Looks Like
A Cheque leaf contains four fragments. These are the ones listed below:
A Cheque has a Payer/Drawer, which is the entity (person/company) that issues the Cheque; a Payee, which is the entity (person/company) that receives the money; a Drawee, which is the bank/FI (financial institution) where the Payee can present the Cheque for payment; and an Amount, which is the fund (money) amount stated in units of a specific currency.
Purpose of A Cheque Leaf
- Cheques are bill exchange instruments that were created to facilitate safe and secure financial transactions
- Cheques allow you to move large sums of money from one bank account to another without the need for a physical transfer. The transfer takes place between the banks of the drawer and the payee
- As previously stated, the drawer and payee in a Cheque leaf can be either natural persons or legal entities because a Cheque is a negotiable instrument/order instrument that ‘orders’ a financial institution to pay an exact amount of money from the drawer’s account to the payee’s account
- The money in the Cheque is measured in specific currency units. The funds are transferred from a transaction-active bank account in the drawer’s name with the financial institution (to which the Cheque belongs) to the payee’s transaction-active bank account, whose account number is filled in by the Drawer on the Cheque.
How Secure is A Cheque Leaf
The following features should be present on a valid bank Cheque leaf:
- In most countries, the drawer’s signature is required to authorise and authenticate the transaction
- The amount to be transferred (money) should be written in both words and numbers so that there is no confusion about the number of zeros and the value to be transferred is clear
- Then came the practises of including an issue date on the Cheque and writing a post-dated Cheque. A Post-dated Cheque cannot be presented to the Drawee until the date has passed. Cheques in India are valid for three months from the date of issue, according to a 2012 RBI notification
- A Cheque no. was added, and Cheque books were issued, in order to create a sequential number of Cheques for a specific customer; as a result of this practise, a Cheque no. cannot be presented twice.
- In the latter half of the twenty-first century, a new security feature, MICR, was introduced in a cheque leaf (machine-readable characters). This enabled the automatic categorization and steering of Cheques between banks, leading to the establishment of automatic central Cheque-clearing facilities.
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