PAYMENT AND COLLECTION OF CHEQUES
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Principles and Practices of Banking — JAIIB.
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What is a cheque as defined under the Negotiable Instruments Act, 1881?
A cheque is a bill of exchange drawn on a specified banker and payable on demand. It must be signed by the drawer and contain an unconditional order to pay a certain sum of money.
What is the meaning of 'payment in due course' under the NI Act?
Payment made in good faith without negligence to rightful holder.
What is the statutory period for presenting a cheque for payment in India?
A cheque is valid for 3 months from the date of issue as per RBI guidelines. After this period, it becomes stale and the bank is not obligated to honor it.
What is the liability of a banker who pays a cheque bearing a forged endorsement?
Banker is liable as no protection exists for forged endorsements.
What is a crossed cheque?
A crossed cheque has two parallel transverse lines drawn across its face, restricting payment to be made only through a bank account. It cannot be encashed directly over the counter.
What is the effect of a 'Not Negotiable' crossing on transferability of a cheque?
Cheque remains transferable but transferee cannot get better title.
What is the difference between a general crossing and a special crossing?
A general crossing has two parallel lines with or without words 'Not Negotiable' or '& Co', allowing payment through any banker. A special crossing names a specific bank between the lines, restricting payment to that bank only.
Under which section of the NI Act does a collecting banker get statutory protection?
Section 131 of the Negotiable Instruments Act, 1881.
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