What is a bearer cheque? What is the withdrawal limit and the rules.

 What is a cheque?

A cheque is a negotiable instrument and is very common. If you are a savings bank account or current account holder, you can issue a cheque in your name or favor of others. By doing so, you can order your bank to pay a specific amount to a particular person. Hence it is something tangible that guarantees payment in the form of money on a particular date. Broadly speaking cheques are of different kinds such as- Order; bearer; blank; counter, etc. In this article, you will learn more about the bearer cheque and the rules you must follow.

What is a bearer cheque?

Do not cancel the word bearer on the cheque. This cheque is payable to the holder; The presenter of the cheque is regarded as rightful while encashing the money. Thus, the bearer may encash the amount after submitting it. However, such cheques are risky because if the cheque is lost, the person who finds the cheque can encash the amount. However, a stop payment may be initiated if required. The Bearer cheque doesn't need the presenter to provide any supporting documents. This makes the cheque a risky mode of money transfer.

How do I draft a bearer cheque?

If you are a new user of the bearer cheque, you must understand the procedure you must follow while drafting it. Drafting one can be tricky and straightforward at the same time. The following points will give you a detailed description of how to prepare one:

There are three parties to a bearer cheque; Drawer, payee, and drawee:

  • The drawer is the one who issues the cheque.
  • The payee holds the favor of the drawn cheque.
  • The drawee is usually the bank or the intermediatory.

Keeping these points in mind, The drafting of the cheque consists of :

  • On the right top corner mention the date.
  • Followed by the name of the payee.
  • Mention the amount in words and figures.
  • Insert your authorized signature.

What is the limit specified for a bearer cheque?

As of being a type of an open cheque a bearer cheque hold no limit of an amount. The only catch is that if a bearer wants to withdraw more than fifty thousand rupees, then they have to present a valid proof. The PAN card and the PAN number serve as evidence. This rule has come into account after many fraudulent cases. Since withdrawing more than fifty thousand rupees seems to be a significant amount the bank requires substantial evidence. Moreover, The rule acts as security to many lost bearer cheques.

What are the rules to draft a DD?

The golden rules one must follow while drafting a bearer cheque is as follows:

  • If the cheque is a self-bearer cheque, and above an amount of ten lakhs, the payee's signature is required on the face of the cheque.
  • Don't cancel the word bearer on the cheque.
  • The law provides that a firm can only withdraw through other forms of cheques as there has to be proper verification. Transactions initiated by the firms are in large sums. The bank cannot be negligent in accepting a bearer cheque in favor of a firm.
  • There is a high possibility of losing a bearer cheque, and the bank is not responsible for a fraudulent withdrawal.
  • Cash withdrawal in case the drawee is an illiterate, or an aged person can be tricky. The withdrawal can take place once the thumb impression is inserted. If the drawer is an uneducated person, he may call on the bank personally to draw the money from his/her account.

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