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DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : P. Samba Murthy
Designation : Head of Department
Branch : D.C.C.P.
Institute : S.R.R.S. Govt. Polytechnic, Sircilla,
Karimnagar District
Year/Semester : V Semester
Subject : Banking – I
Subject Code : CCP- 504(B)
Topic : Negotiable Instrument Act
Duration : 50 Minutes
Sub-Topic : Powers and duties of a banker
in payment of cheques
Teaching Aids : PPT CCP-504(B).70 1
Objectives

On completion of this period, you would be able to


 Understand the precautions to be taken by
the paying banker before honouring cheques

CCP-504(B).70 2
Known to unknown

1. What are the duties and responsibilities of a


banker while honouring the cheques?

CCP-504(B).70 3
Recap
 So far we have discussed with the regard to the
duties and responsibilities of a paying banker
while accepting the cheques.
 It is clearly understood that when the payments
should be made unless and until there is no legal
restrictions in payment.
 Now, let us learn in this session the
precautionary measures to be taken by the
banker while honouring the cheques.

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Precautions to be taken by the Paying
Banker:
 In order to protect its we well as the customer’s
interest, the paying banker should take the
following precautions while making payment of his
customer’s cheques.
 The presentment of the cheque must be made on a
working day during the business hours of the bank.
 The paying banker should examine whether the
cheque is payable at its branch.

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Precautions

 The cheque must be currently dated and the


cheque should not be stale.
 A cheque is generally considered stale when
the period elapsed is six months from the date
of the cheque.
 The cheque should not be a post dated cheque.

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Precautions

 Unless the correct date is put and signed, the


banker is not obliged to pay the cheque.
 The signature on the cheque should tally with the
specimen signatures in the records of the bank.
 The payee must be named clearly.
 The cheque must be out of the cheque book
issued in the customer’s account.

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Precautions

 The amount on the cheque should be written in


ink and it should not be written in pencil or by
rubber stamp.
 The cheque should not be mutilated. A cheque
is mutilated when it is cut or torn or when part
of it is missing.
 If there is any material alteration on the cheque,
it must be confirmed by duly affixing the full
signature of the customer for the bank to
honour such cheque.
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Precautions

 The amount in words and in figures should tally.


 When the amounts in figures and in words
agree, the banker will honour the cheque.
 The cheque presented for payment should be
scrutinized at the counter to see whether it is an
open or crossed cheque.
 A crossed cheque should not be paid across the
counter and it should be credited to the account
of the customer.

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Precautions

 The paying banker must ensure that sufficient


funds are available in the account of the
customer for making payment.
 Before honouring a cheque, the paying banker
should see that the endorsement is regular.

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Summary

 The banker has to take every care and


precautions while honouring the cheques.
 They must be in proper form, it must contain
date, amount, payee’s name and duly signed by
the account-holder and should be submitted
within the stipulated period.
 It must not be stale or post-dated and presented
during working hours.

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Quiz

1. A stale cheque is
a) Issued by RBI
b) Issued by SBI
c) Issued with today’s date
d) Lapsed six months from the date of issue

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Quiz

1. A cheque is called ‘open cheque’ when


a) The amount is not mentioned in the cheque
b) There is no date on cheque
c) The cheque is not crossed
d) There is no signature of the issuer

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Frequently asked questions

1. Explain the precautions which the paying


banker should take before making payment of a
cheque.
2. When must a bank refuse the payment of a
cheque? Discuss.

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