Checks are written that is dated, signed and dated instrument that instructs a financial institution to pay a certain amount of money to the person who issued it. The person who writes the check is known as the payor or drawer and the person to whom the check has been addressed is the payer. The drawee on the other being in the financial institution from which the check was drawn.
Checks can be cashed, or they can be deposited. When the payer presents cheques to a bank or other financial institution to make a deal, the funds are drawn from the payor’s bank account.
It’s another method of instructing the bank to transfer funds from the payor’s account to the payer’s or to the payee’s account. The majority of checks are written against checking accounts, but they can also be used to get funds from savings or any other type of bank account.
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The Finance Ministry has declined the idea of a ban on chequebooks for promoting digital transactions, saying it has no plans to scrap it. Here’s the reason why Indian businesses love chequebooks.
India is going through a massive digital revolution and a simple rumour of the government withdrawing chequebooks caused enough fury. And, why? because businesses still adore their chequebooks for transferring money. Sure, India is moving — slowly — toward a cashless economy, but cheques continue to hold significance.
According to RBI figures, in August, there were cheque transactions in the amount of Rs 6,224.34 billion, almost three times as much as debit card transactions, and almost 10 times higher than transactions using mobile wallets, even as digital transactions surged during the post-Demonetisation period. Here’s why businesses still love chequebooks, even when they’re changing to digital ways of paying for things.
Chargeless:
Whether it is digital transactions or any other form of the traditional financial instrument there is a fee for each. Writing dog checks costs nothing.
Traditional:
Cheques have been an integral part of India’s payment landscape. Over the years businesses have gained a sense of confidence and security when writing cheques. Furthermore, options for securing payments due in future can be secured with post-dated cheques.
Secure:
Digital transactions are not without the threat of Cyber risk. Cheques are secure because they can be handed over to someone and the recipient receives the funds in his personal account. It is common for companies to go with a secure option especially when a large amount is involved.
Convenient:
Most importantly, in India where the majority part of people struggling to adapt to the digital revolution, specifically in rural and smaller cities regions, writing a check is more efficient than using a mobile to enter the password and making sure the network is a strong Internet connection, etc.
However, cheques do have their disadvantages too. While online transactions are speedy, cheques may take 2-5 days to clear. But if it is safer, chargeless and convenient, why businesses would shift to a different mode of payment without a reason?
Pinky Khanna The Personal Tax expert with EY India, says, “Cybersecurity dangers, protection from fraud and the removal of transaction fees in digital transactions are just a few of the main steps that must be undertaken before cheque books can be gradually eliminated. …. Additionally, educating the elderly and those living in cities that are smaller is essential for making this a success.”