Though it appears to many of us that Banker’s Cheque is same as Cheque Personal, hereinafter referred as ‘Cheque’, that we issue to make payments, these two are completely different in meaning and methods of payment. I made a mistake when I filed my First RTI Application before a Central Public Authority. I issued a Cheque of Rs. 10/- as Fees for RTI. I was called by the PIO to take my Cheque back and pay RTI Fees through Banker’s Cheque (similar to Demand Draft) or Indian Postal Order (IPO). I have enumerated major difference between Personal Cheque and Banker’s Cheque or Demand Draft below:
Difference between Personal Cheque and Banker’s Cheque/ Demand Draft:
1). Cheque and Demand Draft is a negotiable instrument while Banker’s Cheque is non negotiable instrument.
2). Cheque is issued by customer (individual/company), whereas Banker’s Cheque/Demand draft is issued by bank.
3). A Cheque is drawn by an account holder of a bank, whereas banker’s cheque is drawn by one branch of a bank on another branch of same bank. (Illustration: If I am account holder in a bank, I can get cheque book from that bank. Whenever, I need to make payment to anyone through cheque, I just sign cheque and give to the party. The person to whom I issue cheque will go to bank and deposit cheque. Bank will deduct money from my account and deposit to the account of person to whom I issued cheque. Here we see that money was deducted from my account, that means I have drawn money from my account. But, in case of Banker’s Cheque/Demand Draft, cheque is issued by bank. When the person who have Banker’s Cheque/ Demand Draft deposit Banker’s Cheque/ Demand Draft to bank, money will be deducted from bank’s account and will be paid to the person. This means, here the money is drawn by the bank.)
4). In cheque, payee gets payment after presenting cheque to bank, while DD is issued after making payment to bank. (Illustration: We issue cheque to any person, who can get money after depositing the cheque to bank. This means, first cheque is issued, then money is paid. But, in case of Banker’s Cheque/ Demand Draft, first we pay money to bank, then bank issues Banker’s Cheque/ Demand Draft
5). Cheque can be dishonored(can bounce) due to insufficient balance in drawer’s account, while banker’s cheque cannot be dishonored as amount is paid before hand. (Illustration: As we saw in point 4, in case of cheque, money is paid after issuing cheque, but in case of Banker’s Cheque/ Demand Draft money is paid before issuing Banker’s Cheque/ Demand Draft. Accordingly, if money is not sufficient in bank account of the person who issued cheque, then cheque will bounce, and the person who received cheque will not get money from bank. That means, cheque can be dishonored. But in case of Banker’s Cheque/ Demand Draft, since bank has already received money, bank always pays. Thus, Banker’s Cheque/ Demand Draft can’t be dishonored.
6). Payment of cheque can be stopped by drawee, whereas payment cannot be stopped in banker’s cheque.
7). A cheque can be made payable either to a bearer or order. While, banker’s cheque is payable always to the order of a certain person..
8). In cheque drawer and payee are different person. In banker’s cheque, both parties are same i.e. bank.
9). A cheque needs signature to transfer amount, While DD does not require signature to transfer funds.
These are the major difference between Personal Cheque and Banker’s Cheque or Demand Draft.
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