Types of Cheques Explained: Bearer, Order, Crossed and Post-Dated
Quick Answer: A cheque is a bill of exchange drawn on a specified banker and payable on demand, defined under Section 6 of the Negotiable Instruments Act, 1881. For bank exams, the key types of cheques are bearer, order, crossed, post-dated, ante-dated, stale, self, blank and mutilated cheques. A cheque is valid for 3 months from its date, and dishonour due to insufficient funds attracts punishment under Section 138 NI Act.
- What Is a Cheque? Quick Answer for Exams
- Key Features and Essential Elements of a Cheque
- Parties to a Cheque: Drawer, Drawee and Payee
- Bearer Cheque: Meaning and Risk
- Order Cheque: Meaning and Safety
- Crossed Cheque: Types of Crossing and Effects
- Post-Dated, Ante-Dated and Stale Cheques
- Other Important Cheque Types for MCQs
- Endorsement of Cheques: Types Every Aspirant Must Know
- Dishonour of Cheque: Section 138 NI Act Rules
- Crossing vs Order vs Bearer: Comparison Table
- Previous-Year Style MCQs and Rapid Revision Points
- Frequently Asked Questions
- Q: What is the validity period of a cheque in India?
- Q: Can a bearer cheque be crossed?
- Q: What is the punishment for cheque dishonour under Section 138?
- Q: Who is the drawee of a cheque?
- Q: Is a post-dated cheque valid before its date?
- Related reading
What Is a Cheque? Quick Answer for Exams
Section 6 of the Negotiable Instruments Act, 1881 defines a cheque as: “a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.” Since the Amendment Act of 2002, the definition also includes the electronic image of a truncated cheque and a cheque in electronic form (digital cheque).
Every cheque involves three essential parties: the drawer (account holder who signs), the drawee (the bank on which the cheque is drawn) and the payee (the person named to receive payment). A cheque is always payable on demand — this makes it the most common negotiable instrument in banking exams.
For the official text, refer to the Negotiable Instruments Act, 1881 on the India Code portal and Reserve Bank of India circulars on cheque validity and truncation.
Key Features and Essential Elements of a Cheque
For a cheque to be valid and payable, it must contain the following mandatory particulars:
- Date: an undated cheque can be filled in by the payee, but banks may refuse payment.
- Payee: the name of the person to whom payment is to be made (or “self”/”bearer”).
- Amount in words and figures: both must match; if they differ, the amount in words prevails (Section 18, NI Act).
- Signature of the drawer: must match the specimen signature held by the bank.
- Drawee bank and account number: the cheque form itself identifies the banker and branch.
- Unconditional order: a cheque must be an order to pay, not a request.
- Payable on demand: payable immediately when presented.
Parties to a Cheque: Drawer, Drawee and Payee
- Drawer: the account holder who writes and signs the cheque, directing the bank to pay.
- Drawee: the bank on which the cheque is drawn — the party directed to pay. In the case of a cheque, the drawee is always a banker.
- Payee: the person named in the cheque who receives the money.
Example: If Ravi has an account with SBI and writes a cheque for ₹10,000 in favour of Meera — Ravi is the drawer, SBI is the drawee, and Meera is the payee.
Bearer Cheque: Meaning and Risk
A bearer cheque is payable to the bearer — that is, to whoever holds or carries it (Section 8 concept: “bearer” means the person in possession of a negotiable instrument payable to bearer). The words “or bearer” are printed on the cheque leaf after the payee’s name space.
- It is payable on delivery — no identification or endorsement is needed.
- It carries high theft and loss risk: anyone presenting it at the counter can collect the money.
- Transfers by mere delivery make it the riskiest but most convenient cheque type.
Order Cheque: Meaning and Safety
An order cheque is payable to a named person “or order.” The word “bearer” is struck off, and payment is made only to the payee or to a person endorsed by the payee.
- The bank verifies the identity of the payee before payment.
- Transfer requires a valid endorsement by the payee.
- It is much safer than a bearer cheque and is the default form in most banking transactions.
Crossed Cheque: Types of Crossing and Effects
Crossing means drawing two parallel transverse lines on the top-left corner of the cheque (with or without words like “& Co.” or “Not Negotiable”). A crossed cheque cannot be paid at the counter in cash — payment must be credited only to a bank account of the payee (or endorsee). This protects the drawer against theft or misuse.
Types of crossing (Sections 123–131, NI Act):
- General crossing (Section 123): two parallel transverse lines, with or without the words “and company.” Payable only through any bank account.
- Special crossing (Section 124): the name of a specific bank is written between the lines; payment must be made only through that bank.
- Restrictive crossing (“Account Payee Only,” Section 123 proviso): proceeds must be credited only to the payee’s own account — non-transferable in practice.
- “Not Negotiable” crossing (Section 130): the transferee gets no better title than the transferor; it restricts negotiability but not transferability.
- A banker paying a crossed cheque otherwise than to a bank does so at its own risk (Section 126). “Payment in due course” for crossed cheques is covered under Section 10, and protection to the paying banker under Sections 128 and 131 (Section 131 relates to the collecting banker’s protection for acts in good faith).
Post-Dated, Ante-Dated and Stale Cheques
- Post-dated cheque: bears a future date; it becomes payable only on or after that date. A bank paying before the date does so at its own risk.
- Ante-dated cheque: bears a date earlier than the date on which it is actually drawn — it is perfectly valid, provided it is presented within the validity period.
- Stale cheque: a cheque presented after its validity period has expired. As per RBI guidelines effective 1 April 2012, cheques are valid for 3 months from the date of issue; beyond this, banks treat the cheque as stale and refuse payment.
Other Important Cheque Types for MCQs
- Self cheque: drawn in favour of “self” — the drawer personally withdraws cash from own account.
- Traveller’s cheque: pre-printed fixed-amount instrument used abroad, encashable at foreign banks/agents; safer than carrying cash.
- Banker’s cheque / Demand Draft: issued by the bank itself, payable at the issuing or another branch — guaranteed payment since the bank is the drawer.
- Blank cheque: signed by the drawer but without amount, date or payee — highly risky.
- Mutilated cheque: torn or damaged cheque; paid only if the material portion is intact and confirmed by the drawer.
- Truncated cheque: a cheque truncated during clearing — the electronic image replaces the physical cheque (Section 6, post-2002 amendment; CTS — Cheque Truncation System).
Endorsement of Cheques: Types Every Aspirant Must Know
Endorsement (Section 15, NI Act) means signing on the back of the instrument to transfer it.
- Blank endorsement: signature only — e.g., Meera signs the back; now it becomes payable to bearer.
- Full (endorsement in full): signature plus direction to pay to a named person — e.g., “Pay to Riya — Meera.”
- Restrictive endorsement: restricts further negotiation — e.g., “Pay Riya only.”
- Conditional (facultative/sans recourse variants): payment subject to a condition — e.g., “Pay Riya if she delivers the goods.”
Dishonour of Cheque: Section 138 NI Act Rules
Section 138 of the NI Act (inserted by the 1988 amendment, strengthened in 2002) makes cheque dishonour a criminal offence when it is dishonoured for insufficiency of funds or because the amount exceeds the arrangement with the bank.
Conditions and procedure:
- The cheque must be presented within its validity period (3 months).
- The payee must send a notice of demand within 30 days of receiving information of dishonour.
- The drawer must pay within 15 days of receiving the notice; failing that, the complainant may file a complaint within 30 days thereafter.
- Punishment: imprisonment up to 2 years, or fine up to twice the cheque amount, or both.
- Other grounds of dishonour include signature mismatch (“refer to drawer”), alteration, stale cheque, frozen account, or suspicion of forgery — but Section 138 applies specifically to insufficiency of funds.
Reference: India Code — Negotiable Instruments Act, 1881; banking notifications at rbi.org.in.
Crossing vs Order vs Bearer: Comparison Table
| Point | Bearer Cheque | Order Cheque | Crossed Cheque |
|---|---|---|---|
| Payable to | Holder/bearer | Named payee or endorsee | Payee’s bank account only |
| Payment mode | Cash over the counter | Cash to identified payee or account credit | Only through a bank account |
| Identification needed | No | Yes | Yes (account credit) |
| Endorsement needed for transfer | No — mere delivery | Yes | Yes |
| Safety | Lowest | Moderate | Highest |
| Governing provision | Section 8, 85(2) | Section 85(1) | Sections 123–131 |
Previous-Year Style MCQs and Rapid Revision Points
1. A cheque is defined under which section of the NI Act, 1881?
(a) Section 5 (b) Section 6 (c) Section 8 (d) Section 138
Answer: (b) Section 6
2. The validity period of a cheque in India is:
(a) 1 month (b) 3 months (c) 6 months (d) 12 months
Answer: (b) 3 months (from the date of issue, per RBI guideline effective 1 April 2012)
3. “Not Negotiable” crossing is provided under:
(a) Section 123 (b) Section 124 (c) Section 130 (d) Section 131
Answer: (c) Section 130
4. Under Section 138, the payee must send a demand notice within:
(a) 15 days (b) 30 days (c) 45 days (d) 60 days
Answer: (b) 30 days of receiving information of dishonour
5. A cheque with a future date is called:
(a) Stale cheque (b) Ante-dated cheque (c) Post-dated cheque (d) Mutilated cheque
Answer: (c) Post-dated cheque
6. In a cheque, the drawee is always:
(a) An individual (b) A banker (c) The payee (d) The endorser
Answer: (b) A banker
7. If the amount in words and figures differ, which prevails?
(a) Figures (b) Words (c) Smaller amount (d) Cheque is void
Answer: (b) Amount in words (Section 18)
Rapid revision recap:
- Cheque = Section 6 NI Act — bill of exchange drawn on a banker, payable on demand.
- Validity: 3 months (from 1 April 2012); beyond it = stale cheque.
- Bearer = riskiest; Order = endorsement-based; Crossed = account-credit only.
- Special crossing names a bank; general crossing does not; “Account Payee” = payee’s own account.
- Section 138: notice in 30 days, payment window 15 days, jail up to 2 years or fine up to twice the amount, or both.
Frequently Asked Questions
Q: What is the validity period of a cheque in India?
A cheque is valid for 3 months from the date of issue, as per RBI guidelines effective 1 April 2012. After 3 months, it becomes a stale cheque and the bank will refuse payment.
Q: Can a bearer cheque be crossed?
Yes. Crossing overrides the bearer nature of a cheque — once crossed, it cannot be paid in cash at the counter and must be credited to a bank account.
Q: What is the punishment for cheque dishonour under Section 138?
Imprisonment up to 2 years, or a fine up to twice the cheque amount, or both — provided the statutory notice procedure (30-day notice, 15-day payment window) is followed.
Q: Who is the drawee of a cheque?
The drawee is the bank on which the cheque is drawn and which is directed to pay the amount to the payee. In a cheque, the drawee is always a banker.
Q: Is a post-dated cheque valid before its date?
No. A post-dated cheque becomes payable only on or after the date written on it; a bank paying before that date does so at its own risk.
Related reading
- Simple vs Compound Interest Shortcuts: Ratio Trick and Difference Formula for SSC & Bank Exams
- Wednesday Warm-Up Quiz: 15 Puzzles and Seating Arrangement Questions for Banking Mains
Quick revision
- Date: an undated cheque can be filled in by the payee, but banks may refuse payment.
- Payee: the name of the person to whom payment is to be made (or “self”/”bearer”).
- Amount in words and figures: both must match; if they differ, the amount in words prevails (Section 18, NI Act).
- Signature of the drawer: must match the specimen signature held by the bank.
- Drawee bank and account number: the cheque form itself identifies the banker and branch.
- Unconditional order: a cheque must be an order to pay, not a request.
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