Kinds of Cheques
There are two kinds of cheques namely bearer cheques and order cheques
1.Bearer cheques
A bearer cheque is always payable to bearer. The important features of this type of cheques are given
below.
I. The name of the payee need not be written in a bearer cheque
II. A bearer cheque can be transferred from one person to another by mere delivery. No
endorsement is needed.
III. The bank shall take the signature of the bearer who encash the cheque at the counter. This
will help the bank to identify the bearer after some time.
2.Order cheques
An order cheque is a cheque which is payable to a certain person. The essential features of order cheque
are;
1.The name of the payee should be mentioned in the order cheque.
2.An order cheque cannot be transferred by mere delivery. It requires endorsement.
3.The paying banker should make proper enquiry about the identity of the payee before
3.M.I.C.R cheques
In order to speed up the cheque clearing process, the banks in India has recently introduced mechanised
cheque processing system. This system utilises MICR (Magnetic Ink Character Recognition) technology to
process cheques. Banks issue cheques in MICR format using the special quality paper and printing
specifications. There is a code line at the bottom of the MICR cheques containing information printed in
magnetic ink. The code line includes the following information.
1.First six numbers indicate the cheque number.
2.Next three numbers indicate city code.
3.ext three numbers indicate bank code.
4.Next three numbers indicate branch code.
After some space there is the number for transaction code. It indicates whether the transaction is
related to savings or current accounts. This magnetised portion of the cheque can be read with the help
of a device known as magnetic ink character reader.
4. Truncated Cheque
A truncated Cheque is defined by the new section 6(b) as, “a cheque which is truncated during the
course of a clearing cycle, either by the clearing house or by the bank, whether paying or receiving
payment, immediately on generation of an electronic image for transmission, substituting the further
physical movement of the cheques in writing.
