We all use cheques, but very few people are aware of the proper rules for signing them. According to guidelines by the Reserve Bank of India (RBI), it is crucial to sign a cheque at the right place and time. A signature in the wrong spot could put your money at risk or even lead to fraud.
To begin with, there are two types of cheques: bearer cheques and order cheques. A bearer cheque can be encashed by anyone who presents it at the bank; no need for a signature on the reverse side, as it essentially works like cash. However, in the case of an order cheque, the payment is made only to the person whose name is written on the cheque. If you wish to pass on an order cheque to someone else, you must sign on the reverse side. This process is known as endorsement. (AI Generated)
But caution is key. Signing the back of a cheque without understanding the implications can be risky. If you sign the back of a bearer cheque, it becomes even easier for the wrong person to misuse it. RBI rules clearly state that you should only sign the back of a cheque when you are endorsing it to transfer to another person. If you are withdrawing money yourself by presenting the cheque at the bank, there is no need to sign on the back. (AI Generated)
Many people mistakenly sign the back of a cheque and, if it ends up in the wrong hands, the money can be stolen. It’s estimated that 90% of people are unaware of this rule, and only realise it when they face issues at the bank. (AI Generated)
For instance, if you sign the front of the cheque (as required) and accidentally also sign the back, it allows anyone holding the cheque to potentially withdraw the funds. To avoid such risks, always be cautious when issuing a cheque. Write the correct name clearly, and if it’s a bearer cheque, keep it safe. If a cheque goes missing, inform your bank immediately. (AI Generated)
These RBI guidelines are designed to help safeguard your hard-earned money. So next time you issue a cheque, be mindful of where and when to sign; it’s a small step that can prevent major problems and ensure a stress-free transaction.
