Instruments of banks

INSTRUMENTS OF

BANKS

TWO TYPES OF INSTRUMENTS

NEGOTIABLE INSTRUMENT

•THE INSTRUMENT WHICH ARE TRANSFERABLE.

NON NEGOTIABLE INSTRUMENT

•THE INSTRUMENT WHICH ARE NOT TRANFERABLE

NEGOTIABLE INSTRUMENT

CHEQUE BANK DRAFT

BILL OF EXCHANGE

PROMISORY NOTES

CHARACTERISTICTS OF NEGOTIABLE

INSTRUMENTS

CHEQUE

An order to a bank to pay a stated sum from the drawer's account, written on a specially

printed form

PARTIES OF CHECK

Specimen of cheque

Types of cheque

1. Open cheque

2. Bearer cheque

3. Order cheque

4. Crossed cheque

Open Cheque

The cheque that are paid

across the counter of the

bank .open cheque may

be bearer o order.

Bearer Cheque

If the drawer orders the

bank to pay money to

person who presents the

cheque for the payment

is called a bearer

cheque.

Order Cheque

An order cheque is always

payable only to a certain

person .the name of payee is

written on the cheque. Bank

pays the check after proper

identification of the payee.

Crossed Cheque

Crossed cheque are those cheque which is crossed by drawer for

safety purpose these cheques are not enchased at the counter of the

bank .at can only credited the account of payee.

Crossing can be in two ways

1. General crossing

2. Special crossing

Crossed Cheque

Crossed Cheque

General Crossing

In this crossing, two parallel lines on

the top left corner of the cheque

with or without words” not

negotiable” or” & co” or “payee

a/c only

Special Crossing

In this crossing the name of bank is

written between two transverse

parallel lines with or without words”

not negotiable” or” & co” or

“payee a/c only”

Causes of Dishonor of Cheque

Bank dishonor cheque on the ground of certain if the reasons.

If bank balance is less than the amount of cheque

If the amount written on cheque in words and figure is different.

If the cheque is reported as lost/stolen after this information bank stops

its payment.

If the person becomes unsound mind the notice is given to the bank

after this notice bank stops its payments.

If court order the bank to stop payment of any account

If the person declared insolvent by the court

If the cheque is torn bank refuse payment

If drawer not mention the date then bank refuse its payment

Notice of the death of customer is received bank refuse to pay

If the cheque is mention before the date mention on it.

If the cheque becomes outdated after six months of its date of issue bank refuse

to pay

If the signature of drawer is not matched with specimen signature bank refuse its

payment

Bank Draft

A type of check where the payment is guaranteed to

be available by issuing bank. Typically, banks will

review the bank draft requester's account to see if

sufficient funds are available for the check to clear.

Once it has been confirmed that sufficient funds are

available, the bank effectively sets aside the funds

from the person's account to be given out when the

bank draft is used.

Specimen Of Bank Draft

Difference between Cheque and Bank draft

Cheque Draft

Issue by individual

Drawn by account Holder

The Drawer And Drawee

are both different.

A cheque can be

dishonor for a want of

sufficient balance in the

account.

Bank Draft

Issue by bank

Drawn by Bank to

another Bank

The Drawer and Drawee

are the same bank.

A bank draft cant be

dishonor Because

payment is certain.