Cheques, Demand Drafts & Banker’s Cheques
Cheques remain relevant for specific situations — institutional requirements, security deposits, and contexts where Section 138’s legal weight matters — even as digital rails handle most transaction volume. This guide covers the Cheque Truncation System (CTS), under which cheques are scanned and cleared via image rather than physical movement, typically within about a day; the CTS-2010 security standard; and the cheque validity period of 3 months (reduced from 6 months by an RBI circular effective April 2012) — a “stale” cheque is returned regardless of available funds. We cover the Positive Pay System (mandatory for cheques of ₹5 lakh and above under RBI’s January 2021 directive, though many banks apply it at lower thresholds set by their own policy), cheque dishonour and Section 138 of the Negotiable Instruments Act (a criminal offence for insufficient-funds dishonour of a cheque issued against a genuine debt, with a mandatory notice period before prosecution), and stop payment instructions. Finally, we clarify the genuine differences — and convergence — between Demand Drafts, Banker’s Cheques, and Pay Orders, all pre-funded bank-issued instruments that cannot bounce for insufficient funds, and when they still make sense versus electronic alternatives.