Crossing of cheques refers to the act of drawing two parallel lines across the face of a cheque. This process provides an additional layer of security and specifies the manner in which the cheque should be paid. Crossing of cheques helps prevent unauthorized persons from encashing the cheque and ensures that the payment is made through the banking system. Here are the key points to understand about the crossing of cheques:
- Purpose of Crossing: The main purpose of crossing a cheque is to direct the drawee bank to make payment only through a bank account and not over the counter in cash. Crossing adds a level of security by ensuring that the cheque is credited to the account of the payee and is not negotiable to anyone else.
- Types of Crossing: a. General Crossing: A general crossing is made by drawing two parallel lines across the face of the cheque without adding any additional instructions or the name of a specific bank. This type of crossing directs the drawee bank to make payment only through the banking system and not in cash. b. Special Crossing: A special crossing is made by drawing two parallel lines across the face of the cheque with the addition of the name of a specific bank between the lines. This type of crossing directs the drawee bank to make payment only to the specified bank mentioned in the crossing.
- Effect of Crossing: a. Non-negotiable: When a cheque is crossed, it becomes non-negotiable. It means that the cheque cannot be transferred by mere delivery (as a bearer instrument) but must be deposited into a bank account of the payee or endorsee. b. Payment through Banking Channel: The crossing instructs the drawee bank to make payment only through the banking system, ensuring that the funds are credited to the account of the payee or the specified bank. c. Enhanced Security: Crossing provides a visual indication that the cheque has gone through a controlled banking process, reducing the risk of unauthorized cash encashment or misuse.
- Types of Crossing Notations: a. General Crossing Notation: The general crossing is typically indicated by drawing two parallel lines across the face of the cheque. b. Special Crossing Notation: The special crossing includes the name of the specific bank between the parallel lines, indicating that the payment should be made only to that bank.
- Open and Account Payee Crossing: In some jurisdictions, an additional instruction of “Account Payee Only” or “A/C Payee Only” may be added along with the crossing. This restricts the payment to be made only to the account of the payee mentioned on the cheque, further enhancing security.
- Effect of Improper Crossing: If the crossing is unclear, irregular, or inconsistent with the instructions on the cheque, the paying bank may seek clarification or refuse to honor the crossing. The paying bank may also refuse to pay a crossed cheque if it is presented for encashment over the counter.
Crossing of cheques is an important practice to ensure the secure and controlled movement of funds within the banking system. It provides assurance that the payment will be made through the banking channel and credited to the appropriate account. The crossing of cheques helps to mitigate the risk of fraudulent encashment and enhances the reliability and trustworthiness of cheque transactions.