The Ubiquitous cheque!, many of us would have signed or received one ( salary, gift voucher) at some point in time, although most of us execute our banking transactions online. Isn't it?
Have you looked in detail, at the various numbers and codes printed on it?
Let us decode them one by one.
Typically, every cheque which is a negotiable instrument has the following numbers printed on it, each serving a distinct function and purpose. Written with special magnetic ink, these digits can be read, only with the help of a magnetic ink reader.
Bank routing number
Basically, a routing number is an identification code of the bank. This nine-digit code is used by financial institutions to identify other financial entities.
Every account holder is alloted a unique account number, an identity, at the time of opening an account.
The primary purpose of allocating this unique digit code to every account holder is to keep a track of all the financial transactions, cash inflows, and outflows related to your account.
The set of digits and their combination differs from bank to bank, public and private sector banks. Through the unique combination, the banking ecosystem would be able to identify your branch and the financial product that you have availed of from your financial institution.
For example, public sector undertakings typically allocate 11-digit codes whereas private sector undertakings ascribe 12 digits or 14 digits.
At the bottom left of the document, you will find the 6-digit number which is serially arranged in ascending order to form the booklet.
This number comes as handy when the drawer wants to maintain and monitor his/her debits and credits and to keep track as to which cheque has been encashed by the payee on whom this document was drawn.
MICR comprises 9 digits, of which the first three digits denote the city code of the branch
- The next three digits represent the city code
- the last three digits denote the branch code
The primary purpose of MICR is to streamline and accelerate the cheque (and other documents) clearance process.
The last two digits at the bottom- right is the transaction id which essentially reveals whether this negotiable instrument is current or a saving account and whether it can be processed at the branch or any other branch of the same bank. This code helps in the quick processing of an intra-city document.
In addition to the MICR code, there is an IFSC code, which also serves a distinct function and purpose.
IFSC- required to fulfill online transactions
Indian Financial System Code or the IFSC is a unique 11-character, alphanumeric code which is ascribed by the RBI to every branch in India, public and private sector undertakings.
- Now the first four characters within the IFSC denote the bank name, the fifth character is default ‘0’ ( which provides leeway to banks for expanding their branches in the future date).
- While the last six characters denote the location of the branch.
The IFSC code is critical input data for every online banking transaction across multiple channels such as IMPS, NEFT, or RTGS.
Now that you know the details of the numbers printed on this document, let us understand the nuances of how to write a valid cheque.
There are five critical fields that you need to fill in.
At the topmost right-hand corner, you have to write the date in the correct format, usually as dd/mm/yyyy.
Writing the date is useful as certain cheques are valid for a limited period. Besides, the receiver of this negotiable instrument is aware of when this document had been written.
You need to write the name of the person or entity to whom you would like to draw the document on. You will find “Pay to the Order of" printed on it. Always ensure that you have spelled the name, correctly.
Check the amount (number & spelling)
On the right-hand side of the document, you will find a rectangle box, inside which you need to write the amount in numeric form.
Always ensure that the amount is written correctly. Always start from the extreme left of the rectangle box and put a slash at the end, so that nobody can write additional numbers in that space.
To prevent such fraudulent activities, the document has a provision to write the amount in words on the line printed in the middle of the cheque.
Your signature on this document, at the bottom right corner, is critical for this negotiable instrument to be valid.
It is a good record-keeping practice to write the details of your cheque - number, name of the payee, amount and date, and a short description of the transaction in the memo section.
What is the cardinal ' don't to follow with respect to cheques?
- If by mistake you've filled incorrect details on this document, it is always better to cancel the leaf and then shred it, instead of stashing it away in your closet.
- Never ever keep a signed blank leaf as it may lead to unauthorized encashment.
- In case you find your cheques misplaced/ stolen, immediately contact your branch to stop any transaction with regard to that document number.
What are the different types of cheques, issued by Indian financial insitutions?
- Account payee
- Pay dated ( PDC)
- Others- outstation, at par, etc.
How do I apply for a cheque book?
You can avail of this booklet through multiple channels- netbanking, mobile banking, ATM, or by visiting your branch and filling up the request form.
Can the bank refuse to process a cheque payment?
Yes, in special situations, the bank has the right not to process the document if the issuer has:
- Not mentioned the date
- Dated cheque- in excess of 6M
- Post-dated cheques being encashed before their due date.
- Unsigned cheque, mutilated cheque.
Can a cheque be processed anytime?
The document has to be presented to the bank, only during banking hours, or during working days.
What happens if the bank misplaces my cheque?
In such a scenario, the bank would notify the customer and the customer is entitled to get reimbursement from the bank.