Open cheque meaning, example, fillup, image & benefits

March 24, 2024CHEQUE RETURN-REASONS

Open Cheque

Normally, It is seen that some checkbooks issued by the bank are already having bearer cheques or order cheques. Because you will see a word written on the cheque “or bearer“, “or order“. These words define a cheque as a bearer cheque or an order cheque that can be used for payment to someone but is not safe. These cheques are called open cheques or uncrossed cheques.

In simple words, an open cheque is a cheque that is not crossed and it may be a bearer and or order cheque. It can be further transferable to the third person.

Contents of this post

What is the Open cheque?

An open cheque is an uncrossed cheque. This cheque can be encashed at any bank, and the payment can be made to the person bearing the cheque. This cheque is transferable from the original payee (the original recipient of the payment) to another payee too. The issuer needs to put his signature on both the front and back of the cheque in case of endorsement. Open cheques include bearer cheques or order cheques.

Images of an Open check

How can you identify an Open check?

You can identify an open cheque as a bearer cheque or an order cheque when you see the words “Or bearer” or “or order” printed on cheques. And make sure, the cheque should not be crossed or the account payee.

What are the features of an Open cheque?

These are the features of the open cheques-

1. It is a negotiable instrument.
2. This cheque may be an “or bearer” or “or order”
3. It can be encashed by the named person or anyone who presents a cheque.
4. Can be passed onto another person by mere delivery.
5. Open cheques are very risky.
6. Generally, Identification is not required in an open cheque.
7. Endorsement is not required in the case of a bearer cheque.
8. Endorsement is required in case of an order cheque.
9. It can be deposited into the named bank account or can be cashed.
10. It must be an uncrossed cheque.

What are the tips while issuing an Open cheque?

1. However, there is no rule of taking the signature of the holder of the cheque at the time of its encashment. But for safety purposes, the bank asks the bearer to sign at the back of the check in the presence of the cashier. This is to confirm the receipt of the funds from the bank.
2. Further, the paying cashier does not need to take many precautions to decide the faithfulness of the payee’s ownership. Nevertheless, the bank doesn’t ask for identification proof of an open cheque, but when the amount is substantial, the bank may ask for identification proof.
3. The transfer of such cheques takes place through simple delivery. This means that if you take the cheque to the bank, the bank issues payment to you against the cheque. Further, no additional authorization from the issuer is necessary in this case.
4. If a person with an open cheque for an amount of ₹ 50,000, the bank has to authenticate the identity of the person and ask for proof of address. The bank has every right to first check the details and once verified, it can make the payment to the person.
5. In case a bank finds something amiss, the bank can demand that the account holder, i.e. the issuer of the said cheque, visit the bank in person as well.
6. A Know Your Customer (KYC) verification process becomes mandatory if the amount on an open check is more than ₹ 50,000.
7. If a bank suspects the bearer of the cheque who may consistently request immediate cash payment, the bank manager can intervene. The bank manager can contact the account holder and describe the situation. If the account holder sanctions authority, the bank manager asks the concerned bank personnel to clear the open cheque.
8. A bank cannot deny the payment of the amount on an open cheque to the person who presents it. If required, the bank can ask the bearer of the cheque to sign on the rear side of the cheque

How do you fill out an Open cheque?