Payment and Collection of Cheques and Other Negotiable Instruments | PAPER II – PRINCIPLES & PRACTICES OF BANKING | MODULE A: GENERAL BANKING OPERATIONS
Banker – Payment and Collection of Cheques Banker – Payment and Collection of Cheques and Other Negotiable Instruments 1. Negotiable Instruments Act The Negotiable Instruments Act, 1881 governs the law relating to promissory notes, bills of exchange, and cheques. It lays down the rules for payment, collection, endorsement, and liabilities in case of dishonour or forgery. 2. Payment of a Cheque Payment refers to the process of the drawee bank honouring the cheque issued by the drawer. The banker must ensure authenticity and that there are sufficient funds. 3. Payment in Due Course – Section 10 Section 10 defines "payment in due course" as payment made in accordance with the apparent tenor of the instrument in good faith and without negligence to the person in possession thereof. 4. Liability of the Paying Bank – Section 31 According to Section 31, the drawee bank is bound to honour the cheque if there are sufficient funds. Fa...