There has been a wild increase in monetary scams in the evolving world of online payments. In such conditions, cheques offer a more reliable and secure way to transfer funds.
It is crucial to understand what a cheque leaf is and how to use it properly. Most of the official transactions for institutions like colleges take place through a cheque leaf.
Did you know that in India, over 50 lakh cheques are presented by banks for clearing every day?
This blog will explain what a cheque leaf is, describe its types, and explain how to write one properly.
What do you mean by cheque leaf?
A cheque leaf is a single cheque from a chequebook. It can be used for various purposes. You can use a cheque leaf to deposit, withdraw, or transfer money from a bank account.
The purpose of a cheque leaf is to notify a particular bank to pay the prescribed amount in the cheque to the payee’s name mentioned on the cheque.
Whoever receives the money is called the ‘Payee,’ the person who writes the check is called the ‘Drawer,’ and the payee’s bank is called the ‘Drawee.’
Importance of a Cheque Leaf
Cheques might seem a bit outdated to you in an era when every transaction can be made online within a few minutes. Here are a few uses of a cheque that are irreplaceable –
- A formal record of payment: As a non-digital medium of transferring funds, cheque leaf provides a physical and documented trail of financial transactions that can be useful for both parties involved.
- Security in high-value transactions: The risk of cyber fraud has also increased recently, and a cheque can reduce this risk in high-value transactions.
- Preferred in legal and official contexts: Court-related payments or property transactions usually require a cheque because fraudulent records of online transactions are very easy to make.
- Schedule payments for later: Post-dated cheques can be used to schedule payments through multiple cheques. This eliminates the need for multiple approvals and saves a lot of time.
- Reduce impulse spending: Cheques take longer than digital transactions, so they become less convenient. In effect, it reduces the risk of impulse spending.
- Proper payment authentication: Every cheque requires a signature, which the authorities meticulously check before transferring funds.
Types of Cheques
Some of the most common types of cheques include:
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Bearer cheque
An open or uncrossed cheque is called a bearer cheque. This cheque leaf does not require any endorsements, and transactions can be done simply by delivering it.
Validity of Bearer Cheque: 3 Months
There is no ‘Bearer’ in this cheque, and whoever holds the cheque can withdraw the amount stated. It is typically used for quick and easy withdrawals like settling a small debt or loan with a friend.
However, its simplicity also increases its risks; if it is lost, anyone can cash them.
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Self-cheque
A self-cheque is issued by the drawer for their personal use, typically for cash withdrawal.
In this case, “Self” is written on the payee line, and it can only be presented to the bank by the account holder for cash.
It also comes under a bearer cheque as it can easily be cashed. Self-cheques require careful handling as they can easily be misused. Self-cheques offer convenience for people who handle large sums of money to withdraw cash.
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Post-dated cheque
A post-dated cheque bears a future date. It can only be cashed on or after the specified date.
Post-dated cheques are used in situations where payment is agreed upon in advance.
For instance, a landlord might request post-dated cheques from tenants for several months of rent in advance. The cheques can be dated to the usual payment date of every month.
Post-dated cheques offer a structured way of managing payments over time but require careful tracking.
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Crossed cheque
A crossed cheque is crossed with two parallel lines.
The cross can be made across the whole check or through the top left-hand corner of the cheque. This notation signifies that this particular cheque can only be deposited directly into a bank account.
Such cheques cannot be immediately cashed by any financial institution. These cheques are very secure since they are not made to be cashed.
If a company pays the contractor, it might issue a crossed cheque to ensure the payment goes directly into the contractor’s bank account.
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Account payee cheque
It is a specific type of crossed cheque which explicitly instructs the bank to deposit the funds into the payee’s bank account. It is mostly marked with the words ‘Account Payee Only’ between the two parallel lines on the cheque.
This type of check can often be seen being used in formal transactions where additional security is required, such as vendor payments by official institutions or salary payments.
These cheques also allow the payee organisation to maintain a secure paper trail and minimize the risk of fraud or misappropriation.
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Banker’s cheque
A banker’s cheque is issued by a bank on behalf of its customer.
It is typically used for high-value transactions where the guarantee of payment is needed.
Banker cheques are used for property-like transactions or official fees. They are prepaid, meaning that the bank guarantees the payment to the beneficiary.
For instance, when buying a car, the dealer might request a bank cheque instead of a regular one to ensure payment security. Once issued, a banker’s cheque cannot be stopped or cancelled.
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Stale cheque
As the name suggests, a stale cheque is one that is expired.
This means that the due date for cashing the cheque (typically 3 months from the date of its issuing) has now passed.
For example, if someone issues a cheque on November 5th, it will be stale by February 5th. If it were not cashed in before that, it would need to either be re-issued or be useless.
10 Tips to Write a Cheque Correctly
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Frequently issue crossed cheques.
Crossed cheques are the safest way to transfer funds. Your money can only be transferred to the account of the person to whom you are issuing the cheque.
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Avoid bearer cheques as much as possible.
A bearer cheque is as good as money in hand. Anyone in possession of the cheque can cash it. This opens them to the risk of not being cashed by the person for whom it was intended.
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Write the correct name.
Make sure that you spell the name correctly, as any discrepancies might cause problems.
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Don’t make alterations.
Scribbling over a cheque or cutting and writing something over it can lead to the cheque being dishonoured.
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Give careful thought to the date.
A cheque leaf is typically only valid for 3 months from the date when it is issued. It can only be cashed on or after the date when it is issued.
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Verify the amount in words and figures.
The amount specified on the cheque should be the same in numbers and words. Verify them before issuing a cheque.
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Avoid any extra spaces.
A cheque leaf should not have any extra spaces. You can draw a line to fill that gap wherever there is an extra space. This ensures that the empty space cannot be misused.
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Keep your signature consistent.
Ensure that you use the same signature that you registered with the bank. Keep it consistent, and avoid using initials.
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Don’t temper with the MICR code band.
Every cheque leaf has a MICR code at the bottom. This code is used by banks to electronically authenticate and validate the cheque. You should not write, fold, or staple over this code as it makes it difficult to read.
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Record all the cheques that you issue.
Keeping track of all the cheques you have issued, along with their date and amount, can be very helpful. This way, you can better monitor your spending or upcoming payments.
What do you do if your cheque leaf is lost?
If you lose your chequebook, it is highly unlikely that it can be used since the cheques will be unfilled and unsigned by you.
If you have lost a signed cheque that was issued to someone then the best thing to do is stop its payment. Don’t remain hopeful that it won’t be stolen and you can simply forget about it. Call your bank and cancel the cheque as soon as you realise that it is missing.
In case you didn’t just lose a cheque leaf but instead the entire chequebook, you will have to get another issued. Try to visit your bank’s home branch and enquire about the procedure for issuing a new chequebook. Most banks will ask you to send a letter to the bank manager explaining your situation and requesting a new chequebook.
You might also be asked to lodge an FIR about the lost chequebook and attach a copy of the FIR to the letter that you send to the bank manager.
A bank typically takes 1 week or more to send you a fresh chequebook.
Cheque Leaf in PF Withdrawal
A cancelled cheque is often mandatory for PF (Provident Funds) withdrawal in India. This might seem unnecessary, but it is actually done for safety purposes.
A cancelled cheque serves as proof of your bank account details. It confirms your account number, name of the account holder, MICR code, etc.
A cancelled cheque is very simple to create. You need to draw two parallel lines in the centre of the cheque. These lines should not cover any essential information about the cheque and should have enough space between them for you to write “cancelled”.
When applying for PF money offline, you need to attach a cancelled cheque with the withdrawal form and submit it to your employer.
Also Read: Understanding GST on Money & Securities, Financial Transaction
Also Listen: CaptainBiz | 🚀 Time to Upgrade Your Business Game!
Cheque Leaf Frequently Asked Questions
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Can I get a cheque leaf online?
Yes, most banks offer the option to order a chequebook online. However, the process differs from branch to branch. You can do this via the mobile banking app, SMS, or even through the bank’s ATM. For instance, ICICI Bank and Axis Bank both offer an option to order a cheque leaf from their mobile apps.
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Can I get cheque Leaf from any branch?
No, you can only get a cheque leaf from the branch where you hold your account. Typically, you would be requested to provide identification to the branch, and then you can issue a cheque leaf, but only from your home branch. If you cannot visit your home branch, you’ll need to consider alternative options, such as changing your chequebook.
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Does cheque Leaf expire?
A cheque leaf expires 3 months after the date of it’s issuing. Once that date is passed the cheque leaf becomes a stale cheque and can no longer be used to transfer funds.
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Can I withdraw PF without a cheque?
No, you cannot withdraw PF without a cheque. The withdrawal process requires your bank account details, which can only be achieved by submitting a cancelled cheque.
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Is there a limit on cheque amount?
The maximum limit for a cheque is 2,00,000 for one day. The income tax department states that no transaction of more than 2,00,000 between individuals can be made within a single day.
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What is a cheque leaf copy?
A cheque leaf copy is a document supporting the accounting entry for a payment by cheque.
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How do I cancel a cheque leaf?
Select an unused cheque from your chequebook. Draw two parallel lines across the cheque using an indelible pen. Write the word “CANCELLED” in bold, clearly, and legibly between the lines. Leave other fields blank, such as the payee’s name or amount and ensure that important details still remain visible.
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Can I get a chequebook immediately?
Once you have finished the application process, you will receive your chequebook within 7-9 days. You can apply for it online and offline at your home branch.
