Bearer Cheque-Differences & Benefits

Bearer Cheque

A cheque is a payment instrument written in the name of a person or a business to be paid on a specific date. A check is a form of payment that is used to transfer funds from one account to another.

It is typically used to make payments that are  secure, and convenient. It helps to transmit huge quantities of money and minimizes the need for physical currency in payments.

Bearer Cheque Meaning

A bearer cheque is one that is payable to the person who holds the cheque. A bearer cheque does not have a payee named on it, and the individual who has one can take it to the bank to have it cashed. The amount permitted for withdrawal is written on a bearer cheque, which has no name on it. A bearer cheque can be transferred by simply delivering it; no endorsement is required. 

In other words, A bearer cheque can be made payable in cash or in the name of a specific person. The term “bearer” does not appear on the bearer cheque. The drawee bank pays the cheque to the bearer or presenter of the cheque over the counter.

A bearer cheque can be passed on to someone else. The transferor of a check does not need to endorse the check when passing it on. When submitting a bearer check for encashment, the bank does not require any identification.

However, if the cheque amount is significant, the bank may request identification to verify the transaction. To certify the receipt of funds from the bank, the encasher must sign on the reverse of the bearer cheque.

In basic terms, a ‘Bearer cheque’ is a cheque that is payable to anybody who presents it for payment at a bank counter.

Write A Bearer Cheque

  • Date:- You must start by stating the date the cheque was issued.
  • Pay:- The issuer must write “self” or “pay to the order of cash” because the bearer cheque does not contain the bearer’s name.
  • Amount:- In the rupees area, you must specify the amount you wish to pay.
  • Signature:- Finally, sign above the Authorized Signatory on the area given.

 

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Rules For Cashing A Bearer Cheque

A bearer cheque is one that is written in the name of a payee who is not named on the cheque. Handling these types of cheques may be dangerous, since if a bearer cheque is misplaced, the person who discovers it becomes the bearer of the cheque and is able to receive cash from the bank. As a result, there are certain guidelines for cashing bearer cheques:

  1.  According to RBI rules, whenever a transaction involving a non-account-based client or a walk-in customer involves a sum equal to or more than Rs 50,000, the bank must verify the customer’s name and address prior to disbursing cash. 
  2. Unless the circumstances warrant it, the bank shall not require the presence of the account holder while making cash withdrawals from ‘self’ or ‘bearer’ cheques. Banks should pay self-pay or bearer cheques with the normal prudence. 
  3. The Reserve Bank of India has warned banks in the nation to be cautious when cashing bearer cheques worth more than Rs 50,000 and to insist on customer KYC verification in such cases. 
  4. If an individual presenting the instrument does not have any form of identification or proof of residence and the transaction is urgent, the transaction must be directed to the branch manager. The branch manager will conduct relevant inquiries of the payer/account holder and will authorise the transaction based on his judgment.

Withdrawal Limit For Bearer Cheques

There is no upper limit to a bearer cheque.

When companies and huge enterprises need cash to pay salaries and wages, the bank accepted cheques for greater sums, which were then dispersed as salaries and payments to workers and employees.

  • In this scenario, the bank is in a position to assist the customer.
  • Individuals, on the other hand, are subject to the bank’s different limitations.
  • A bearer cheque was once used by political parties to withdraw significant quantities of money.
  • Banks, on the other hand, used to be cautious when it came to high-value bearer cheques, never releasing cash without first establishing the cheques true purpose.

A bearer cheque drawn in the name of an individual, on the other hand, has some restrictions. Before disbursing cash, the bank must verify the individual’s name and address if the bearer cheque has a withdrawal amount of more than Rs 50,000.

Payment Of A Bearer Cheque In Cash

A bearer is a person who is in possession of a bearer instrument. Bearer cheques cannot be refused by the bank. However, before payment, the holder must sign on the reverse of the cheque to acknowledge receipt of the funds.

Purpose Of Bearer Cheque

A bearer cheque has the benefit of not having to be “cleared” every time it is handed from one person to another. Most UK checks now include a pre-endorsed “Account Payee” endorsement, indicating that the cheque can only be cleared by the account person identified as the Payee.

When dealing with advance payments when the stock/commodity has the same Bill of Lading/Airway/Roadway Bill, this is a good safe protection for ordinary Joe Public, but for business and specific Exchanges such as the Commodities and Stock Market, this is a good safe guard. It indicates that the stock is followed by the cheque.

A bearer draft/cheque indicates that whoever has it has title. As a result, the check becomes a “Negotiable Instrument,” which may be exchanged like cash but is easier to track.

It also eliminates the need to clear and issue a new document each time the Forein Exchange is negotiated. No matter whose hands it is in, the money is still owned by the bank that issued it, and it functions similarly to a $ or GB£ note in many ways.

A Bank Note in the United Kingdom has the endorsement “I pledge to pay the bearer…” (along with the note’s value). Because it is a prepaid instrument, like currency, a bearer draught functions similarly and is as good as cash. Even better, unlike $ or £ bills, it can be traced.

Also, you don’t need that many notes to make up the value because the bank keeps them in stock and promises to pay the bearer of the document the value wherever it is deposited, which includes going into the bank where it is drawn on, usually Head Office, and converting it to any other form of negotiable instrument. Gold or precious metals, as well as oil and food goods, might fall under this category.

Its main flaw is that it cannot be stopped, however it may be readily redirected and swiftly if it falls into the wrong hands. The money is lost unless you are aware that it has been misappropriated before being handed to the Guarantee Bank.

That is why it is such a versatile tool, but it also has a significant danger of fraud. However, when used correctly, it may help international trade move more quickly. Telegraphic Transfer in the UK is a system called CHAPS (Clearing House Automated Payment System), which is a real-time, irreversible transfer between banks and their clients of other banks, and it has been taken over to some extent by Wired Funds.

A Bearer Draft, on the other hand, can travel through as many hands and in as many countries/currencies as needed without re-issuance.

DON’T THROW IT AWAY! It’s a really important document.

Check This Also:- Cheque Bounce, 16 Reasons Why Cheque Bounce

Advantages And Disadvantages Of A Bearer Cheque

Advantages

  • Obtaining payment of a bearer cheque at the counter is fairly simple.
  • Negotiating a bearer cheque is simple because it does not require endorsement during the process.
  •  It’s appropriate for making little payments.
  •  A person who does not have a bank account can simply get payment of a cheque from the bank without the need for signature verification or attestation.
  •  A bearer cheque can simply be turned into an order cheque.
  • A bearer cheque has the advantages of being as good as currency and being able to be passed from one person to another.

Disadvantages

  • A bearer cheque is not secure since it can be paid to anybody, whether a real payee or a criminal.
  • Due to the high risk of a bearer cheque, it is not suited for large payments.
  •  There is no trace of a bearer cheque’s movements because it is handed from hand to hand without being recorded.
  • Its drawback is that it may be tampered with and used to perpetrate fraud.

The Difference Between An Order Cheque And A Bearer Cheque

Cheques are an instrument that contains an order to pay a specified sum of money to the drawee’s account. Given below are the main differences of a bearer cheque and an order cheque:

  1.  A bearer check does not include the payee’s name and is made payable to the individual who submits it to the bank. Whereas an order cheque is a check drawn in the name of a single individual or person, and the cheque may be presented to the bank for encashment by that individual alone.
  2.  In the event of a bearer check, the bank shall conduct appropriate verification prior to paying the bearer of the instrument. In the event of an order cheque, the individual’s name is already printed on the cheque. As a result, the money is sent to the selected individual exclusively. 
  3. A bearer check can be transferred simply by delivery because it does not require endorsement, but an order cheque requires endorsement and delivery.

Benefit Of A Bearer Cheque

A Bearer Cheque can be transferred to a third party simply by presenting the cheque to the third party. As a result, it can be freely transferred to any number of recipients before the cheque’s expiration date. Transferring this cheque to a third party does not necessitate the use of an endorsement.

I hope you enjoyed and learned a lot from this essay. Thank you a very lot for your help. If you have any questions about this post, please leave a comment. I, Aarti Devatwal, would want to express my sincere gratitude for taking the time to read this essay. I hope you learned a lot from this.

What is the meaning of the Bearer Cheque?

A bearer cheque is one that is payable to the person who holds the cheque. A bearer cheque does not have a payee named on it, and the individual who has one can take it to the bank to have it cashed.

What is the Benefit of the Bearer Cheque?

A Bearer Cheque can be transferred to a third party simply by presenting the cheque to the third party. As a result, it can be freely transferred to any number of recipients before the cheque’s expiration date. Transferring this cheque to a third party does not necessitate the use of an endorsement.

What are the Advantages of the Bearer Cheque?

Obtaining payment of a bearer cheque at the counter is fairly simple.
Negotiating a bearer cheque is simple because it does not require endorsement during the process.

What are the Disadvantages of the Bearer Cheque?

A bearer cheque is not secure since it can be paid to anybody, whether a real payee or a criminal.
Due to the high risk of a bearer cheque, it is not suited for large payments.

What is the withdrawal limit for bearer cheques?

There is no upper limit to a bearer cheque. In this scenario, the bank is in a position to assist the customer. Individuals, on the other hand, are subject to the bank’s different limitations. A bearer cheque was once used by political parties to withdraw significant quantities of money.

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