Bearer Cheque: Rules & Validity
A Bearer cheque (or bearer check) is a flexible financial tool that facilitates quick payments. The bearer cheque can be cashed in by anyone who holds or presents it.
It can be transferred from one individual to another simply by being handed over and does not require an endorsement. Due to their high flexibility and easy transferability, bearer cheques are a fast payment option that does not identify a recipient. While the cheque is valid, it is equivalent to cash for its holder.
How to Write a Bearer Cheque?
The simple steps to fill out a bearer cheque are as follows:
- Request a blank cheque from your bank
- Write the date in the format DD/MM/YY in the upper-right corner of the cheque
- Fill up the Payee Name field with Bearer or Cash. You can either put the name of the payee (the person who received the cheque) and add Or Bearer, or you can leave it blank
- After that, enter the payment amount both verbally and numerically
- Sign the cheque at the bottom of the document.
Withdrawal Rules on Bearer Cheques
Below are the withdrawal rules for Bearer cheque as follows:
- The bank would always ask for identification verification before releasing funds if a person's bearer check is valued more than Rs.50,000.
- However, even if the individual is not the account holder, the bank may or may not ask proof of address if the amount is less than Rs.50,000
- All banks are required to comply with the Reserve Bank of India and have been warned against cashing bearer cheques
- According to the RBI, banks must request the customer's KYC verification before completing a transaction
- Unless time allows, the bank cannot require the attendance of the account holder for a Bearer cheque
- The bank can only make payments over Rs.50,000 with the manager's approval if the person presenting the bearer cheque at the bank does not have identification or proof of address
- In this case, the bank manager gets in contact with the account holder to ask questions regarding the transaction before allowing it.
Withdrawal Limit for Bearer Cheques
Withdrawal limits for bearer cheques differ from bank to bank and may be affected by bank policy, client relationships, and account type. To find out the exact withdrawal limit that applies to bearer checks, it is recommended that you get in contact with the relevant bank and inquire about their policies and procedures.
Validity of Bearer Cheques
A Bearer cheque has a three-month validity period, as per Reserve Bank of India (RBI) standards. The cheque loses its validity after three months and is not rewarded by the bank.
Advantages and Disadvantages of Bearer Cheque
Here are some of the advantages and disadvantages of bearer cheque as follows:
Advantages | Disadvantages |
Money can be transferred quickly between individuals or businesses using a bearer cheque | Due to concerns about fraud and money laundering, bearer cheques may be subject to regulatory scrutiny in some places. |
It makes it possible to conduct transactions right away without requiring identification or approval | As the bearer cheque transfer feature does not need personal identification or endorsement, it is extremely open to fraud. |
Bearer cheques can be employed for business purposes or for quick payment or settlement of short-term debts | Due to the security concerns with bearer cheques, many companies and organizations do not issue them. |
By doing away with complicated procedures and verification steps, bearer cheques simplify financial transactions. | Very little inspections and monitoring are done over bearer cheques, encouraging criminal operations like money laundering. |
FAQs on Bearer Cheque
- Is it possible to cash a bearer cheque at any bank?
Any bank that accepts bearer cheques will allow you to cash them. To confirm their policies and processes for the same, it is advised to check with the specific bank ahead.
- Do bearer cheques have any limitations?
The maximum allowed amount for a bearer cheque can differ based on the rules and regulations of the particular bank or financial institution. For confirming whether a limitation on bearer cheques exists, it is recommended to get in contact with the bank directly.
- Is it safe to issue bearer cheques for large amounts?
Due to the risks that are associated with their transferability, bearer cheques may not be issued for large payment amounts. Because bearer checks are easily lost or stolen, they may be used without authorization. For safer options, it is suggested to speak with the bank or investigate other payment options.
- What is the Bearer Cheque withdrawal limit?
There are no withdrawal restrictions on bearer cheques. The bank would ask for identification and confirm the identity of the person whose name the cheque was issued in if the amount exceeds Rs.50,000. After the verification process has been completed, the bank then gives the money to the bearer or the person who provided the cheque.
- How long is a bearer cheque valid?
Bearer cheques normally last for three months, according to the Reserve Bank of India. They are considered expired after this time and might not be accepted by banks.
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