Why Sign at the back of the Cheque: Most people use cheque books. You may have also issued a cheque and taken payment through cheque from someone. But, have you ever noticed why banks make endorsements on the back of cheques?
Nowadays, all the work related to banking, from withdrawing money to depositing it, is being done online. But, this does not mean that the importance of the cheque book has diminished. You can easily give money to anyone through cheque. You must have often seen that at the time of transaction with a cheque, the back side is always signed. Have you ever wondered why this is done?
The first thing to be noted in this is that the signature is done only on the back of that cheque which is a bearer cheque. Whereas it is not mandatory to sign on the back of the order cheque. Bearer’s cheque is one which can be encashed by anyone by taking it to the bank. It is not necessary that only the person whose name is written on the cheque will be able to withdraw the money from that cheque. The money in the order cheque is given only to the person whose name is written there. It is necessary for that person to be present in the bank. Therefore, signature is not required on the order cheque. Before giving money on the order cheque, the bank employees themselves do a complete investigation and then give the money.
Banks protect themselves
Since anyone can take a bearer cheque and withdraw money, there is a danger that even if someone finds this cheque en route or steals it, the money will be given to him. In such a situation, questions may arise on the bank. One way to avoid this is to get the cheque signed on the back. By taking the signature of whoever has come to withdraw the money, it is ensured that the money has been given by the bank and even if the money has gone to a wrong person, the bank will not have any responsibility in this. However, if the amount is more than Rs 50,000, then the bank definitely asks for address proof from the person coming to collect the cash and only then gives the money. Apart from this, there is another reason that sometimes signatures are taken at the back of the cheque to be double sure about the signature given on the front. If someone refuses to sign, then he will have to apply on a paper with his complete information to withdraw the cash.
When is a signature not required?
As we mentioned above, signature on the back of order or payee cheque is not required. Apart from this, signature is not required on bearer cheque also when a person has gone to withdraw money from his own account through cheque. Signature is required only when a third party comes to withdraw the bearer’s cheque on someone else’s request.
