Banking Operations – Negotiable Instruments

Banking Operations – Negotiable Instruments

Where a bill of exchange, promissory note or cheque is transferred to any person, the instrument is said to be negotiated.

	Cheque	Bill Of Exchange
Drawee	Always drawn on a banker	Not necessarily be drawn
		on a banker
Pay ability	Payable on Demand	May   be   payable   on
		demand  or  may  be  on
		future date
Maturity	Grace Period is not allowed	Three days grace period
		given usuance bill.
Crossing	It can be crossed	Cannot be crossed
Notice Of Dishonor	No notice of dishonor given	Notice of dishonor to be
		given to the drawer.and
		other parties entitled to
		receive the notice.,

Crossing Of Cheques

General Crossing (123)

Not Negotiable Crossing (130)

Special Crossing (124) where a cheque bears across its face in addition of the name of the banker either with or without the words ‘Not Negotiable’

Holder

Holder in Due Course

Endorsement Of Cheques

1.    Endorsement in Blank

2.    Endorsement in Full

3.    Conditional Endorsement – In normal circumstances endorser binds himself to pay upon no other condition than on dishonor of the instrument on due notice of dishonor to him.

4.    Restrictive Endorsement – right of negotiation restricted or excluded by the endorsement. If the instrument is Pay to Mr.M.M. Lal only, then Mr.Lal’s right to negotiate is restricted.

5.    ‘Sans Recourse’ Endorsement – Without recourse/liability to me