A check is a written that is dated, signed and dated instrument that tells a bank to make a particular amount of money to the person who issued it. The person who writes the check is known as the drawer or payor and the person to whom the check has been addressed is the payer. The drawee, on the other side, is the bank where the check is drawn.
Checks are able to be cashed or they can be deposited. If the person who is paying presents cheques to a bank or financial institution in order to discuss the payment, the money is taken out of the payer’s bank account.
It’s another method for the bank to request that the institution transfer funds from the payment account to the payee or to the account of the payee. The majority of cowboy checks are written against a checking or savings account, but they can also be utilized to transfer cash from savings accounts or other kinds of accounts.
The Finance Ministry has declined the idea of a ban on chequebooks for encouraging digital transactions declaring the government has no plans to end it.
Here’s the reason why Indian businesses love chequebooks.
India is experiencing a huge digital revolution, and just a rumour of the government withdrawing chequebooks caused enough fury. And, why? Since businesses continue to love their chequebooks to transfer funds. Yes, India is moving -slowly — towards a cash-free economy, however cheques have always been a source of value.
According to RBI data, in August, there were cheque transactions that totalled more than 6,224.34 billion, which is three times higher than debit card transactions and almost 10 times higher than the mobile transaction, even with digital transactions increasing in the post-Demonetisation age.
Here’s why businesses continue to love chequebooks, even when they’re going digital:
Chargeless:
No matter if it’s digital or traditional transactions or different forms of the traditional financial instrument there is a cost for each. A cheque can be written for nothing.
Traditional:
Cheques have always been an integral part of the payment landscape in India. Since the beginning, companies have come to develop a sense of confidence and security when making cheques. Additionally, alternatives like the ability to secure the payment due in the future can be made with a post-dated check.
Secure:
Digital transactions do not come with no cyber risks. Cheques are safe, they can be handed over to someone and someone else gets the funds in his account. It is normal for businesses to pick a method that is safer particularly when a substantial amount is involved.
Convenient:
Most importantly, in India where the majority part of people trying to adjust to the digital revolution, specifically in rural and smaller cities regions, writing a cheque is much more practical than using a cellphone or entering a password as well as ensuring the strength of the network Internet connection, etc.
Though, cheques have their drawbacks, too
Although online transactions are instant, however, cheques can take up to 2-5 days to clear, however when it’s safer in terms of cost, convenience and speed then why would businesses switch to a different payment method unless there is some incentive?
Pinky Khanna who is the Personal Tax specialist with EY India, says, “Cybersecurity dangers, protection from frauds and removing transaction charges from transactions made online are some of the most crucial steps which must be taken before cheque books can be gradually eliminated. …. Also, teaching the older generations and those in smaller cities remains key in making this process a success.”