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Rules for Cash payment of a cheque

Rules for Cash payment of a cheque

When uncrossed cheque is presented for payment in cash at the counters of the bank, the presenter should sign on the reverse of the cheque. Banks verify the signature on the cheque with specimen signature of drawer on record before making payment.  The payment cashier will ask for another signature to be made by the presenter at the time of payment. The banks ordinarily do not insist for presence of account holder for making cash withdrawals in case of  bearer cheques unless the circumstances which warrants bankers to take precaution. In case of the bearer word in the cheque is cut then it becomes an order instrument .Banks make payment of order cheque only on confirming the endorsement/s of Payee and other endorsees on the reverse of the cheque. A depositor cannot withdraw a smaller sum than one Rupee except  on the occasion of closure of the account.

Cash payment where Payee’s name written as self, our selves, Pay Cash etc.

It is a convention that companies and organizations while withdrawing cash from the bank write ‘ourselves’ in place of payee’s name. Sometimes even the cheque may be issued ‘Pay Cash’.   Banks have been making cash payment of such cheques to the person who presented it at the counter without any hassle. However, nowadays it is learned that some bank branches refused the payment and insisted to write only “self” instead of “Ourselves”. The logic for such refusal is that an entity whether the firm, company or any other organization is a legal person (entity) opened the account and not a group of people. Moreover, cash payment can be made only to a single person and not to group of people against a single cheque, although more than one person signed on the cheque as authorized signatories of the organization. Many people question the validity of such refusal by the bank when a bearer cheque ‘payable to ourselves’ is presented for payment.

The above discussion rather seems like an argument based on English grammar and not on legal finding. Legally speaking banks are bound to pay to any person who presents a bearer cheque for payment at the bank counter, if the cheque presented is otherwise in order. Nowhere in negotiable instrument acts prohibits the payment of a cheque where payee’s name is mentioned as ‘Ourselves’. Furthermore, an order cheque payable to unidentifiable payee, banks are in order if it is paid to the account holder. Therefore the order cheques payable to God, Temple, Church, Masjid, etc. are considered as unidentifiable payee and in such cases banks are in order to make the payment to the account holder. Exactingly the words ‘Self’, ’Our Selves’ or ‘pay cash’ are not a noun, as persons of that name does not exit and therefore paid to the account holder.

When a cheque endorsed in blank by the drawer, even an order cheque becomes a bearer cheque. So the cheque bearing company’s seal with signatures of authorized persons on its back is treated as bearer cheque. Thus, the cash payment can be made to the bearer of the cheque irrespective of payee’s name.Usually, the persons coming to the bank for cash withdrawals on behalf an entity are known to the bank (regular employee, partner etc.). The presenter has to sign on the reverse of the cheque in the presence of cashier as an acknowledgement of having received the cash. The bank by convention may also insist the presenter to write his name, address and phone number whenever a new face presents the cheque for payment.

Cash payment of  cheques issued in favour of firms/companies

As per law a bearer cheque is always a bearer cheque. However, when a cheque is drawn up in favour of a business entity, the cheque is purported to have the crossing effect. Banks cannot afford to make payment of such cheques without proper enquiry as that may later on deemed as negligence on the part of the banker.  If proper identification is established banks may make payment of such cheques across the counter (normally bank contact their account holder and inform that the subject cheque is presented to them for cash payment and take their consent for the payment). Though it is not a rule prescribed by any law for payment of bearer cheque, as an abundant precaution cash payment of a cheque drawn up in favour of firms and companies is done only on obtention of endorsement (rubber stamp of the firm on the reverse of the cheque and signed by the authorised signatory of the beneficiary firm).

Cash withdrawal by illiterate/bedridden persons

If the depositor is unable to write, he/she must call on the Bank personally to withdraw money from her/his account. In case of aged or bedridden person, banks depute a person or an official at depositor’s cost, to obtain the signature/thumb impression duly witnessed.

Related articles:

Definition of a cheque

Effects of not negotiable mark on a cheque

General and special crossing of a cheque

Meaning of inchoate cheque

Meaning of material alteration in a cheque

Cheque bounce implications

Difference between bill of exchange and cheque

Little more to know about a cheque

(19) Comments

  1. Swapnil Ranavare

    Hello air/madam, I have a question about bearer cheque payment. I received a bearer cheque of Bank Of Maharashtra for one of my party, The account was in the branch which was a bit far away from my location, so I visited the branch of Bank Of Maharashtra near by me, but they refused to make the payment with the reason that either The payee has to be there in person if I have to encash it from that branch, or else I should visit the branch were the account that account belong, So I just wanted to confirm is there any such rule by RBI, It was just an excuse given to me to avoid me. This happens only when I go to Government Bank, but in case of Multi National banks like ICICI etc. I never had such problem. But these government Bank always give such excuse. Hence I finally decided to write this MSG to you. I would be a great help if you help me with the prober rule, So if it not true then next time I won't leave without sacking these government employees by Law. Thank you.

    1. Surendra NaikSurendra Naik - Post author

      Under the present CBS atmosphere, the signature of the drawer of the cheque from any branch can be verified and payment of bearer cheque can be made. If the signature of the drawer scanned in the system is slightly different from the signature appearing on the cheque or the cheque is issued in favour of a firm, sometime other branch(out of doubt) may ask the bearer to go the drawee branch to collect the payment. Your experience from a particular public sector bank branch may be bad, but it is a wrong notion to conclude that all PSBs are bad in service and all private banks are good in service. Just like you, many people also report to me about their bitter experience with new generation private banks/exorbitant charges and ask my opinion about the same.

  2. sumanjit nag

    Some Bankes have rules regarding payment. Generally a bearer cheque can be paid in cash only at the base branch where the account belongs or the drawer himself can withdraw it from any branch he wishes that too restrictions apply from bank to bank. Please go through PSBs bank website such information are generally written clearly under designated context. Dont be so quick to judge rather than find information first abt rules of the bank. Please visit their website to know there policies.

    1. Surendra NaikSurendra Naik - Post author

      Can you please quote which PSB has given you such information in their website. For payment of negotiable instruments, banks have to follow negotiable instrument acts, and they can not form their own law/rules. In the present core banking atmosphere branch banking is replaced by anywhere banking. Signature of the customer can be verified by any branch.

    1. Surendra NaikSurendra Naik - Post author

      If it is a bearer cheque (self or bearer) it can be encashed by the third person. If the word bearer is cut on the cheque it cannot be encashed by the third person.

    1. Surendra NaikSurendra Naik - Post author

      If it is a bearer cheque, legally no need to insist for identity proof of the bearer. However, it is practiced by many bankers to record the name/address/mobile no. of the person who received the cash on the back of the cheque particularly when large amount of cash paid.

  3. Gaurav

    Sir, Greetings.... I have a question for you.... whether is it mandatory to have a witness on cash withdrawal presented by an illiterate person and who should be the witness..... present account holder of the branch where the a/c of an illiterate person is being present or it could be any relative of an illiterate person.... kindly mention the circular no. for my convenience...

    1. Surendra NaikSurendra Naik - Post author

      Each bank has separate guideline for this. In some banks there is no need of witness for cash payment. These are not Rules as they are only operative guidelines. It's as simple as that.

    1. Surendra NaikSurendra Naik - Post author

      There is no limit for the number of signatures on a cheque leaf. Normally an organisation authorizes maximum three signatories, for the convinience as well as within the space available on the cheque for drawee's signatures.

  4. Shadab

    Sir all banks keep record of bearer check or order check. I'd no or I'd photo copy. I mean that bank keeps record of all this check.

  5. Ashvin

    my father is blind... they use thumb impressions... whether cheque book issue to my father or whether they use thumb impressions on cheque

    1. Surendra NaikSurendra Naik - Post author

      There is no limit of Maximum amount through withdrawal slip at the base branch. Withdrawal slips are being provided by the banks to ease the cash withdrawal at home branches.


    Question regarding Third Party Cash Payment in Case of Order Cheque at cash counter. Is Signature of third party attested by drawer on back of the cheque mandatory or not. If not mandatory how can banker verify the third party. Please briefly guide me banking rule in case of third party cash payment.

    1. Surendra NaikSurendra Naik - Post author

      Identification of the Payee is compulsory while making payment to the third party. The drawer either attest the signature of the Payee on the back of the cheque (the cheque bears a blank endorsement of the drawer the cheque is treated as bearer cheque,) or on a separate letter addressed to the bank attesting the signature of Payee.

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