NEGOTIABLE INSTRUMENTS E- PURSE TRUNCATION OF CHEQUE The word “ negotiable” means “transferable from one person to another” A negotiable instrument is a signed document that promises a sum of payment to a specified person Negotiable instruments are transferable in nature Sec.13 of the Indian Negotiable Instrument Act, 1881 defines a negotiable instruments as “ a promissory note, bill of exchange or cheque payable either to order or to the bearer.” Commercial banks also deal with these instruments. The bank collects these instruments for the customers to grant loans and advances against these instruments Cheque Truncation System (CTS) is a cheque clearing system undertaken by the Reserve Bank of India (RBI) for quicker cheque clearance Cheque Truncation System (CTS) or Image-based Clearing System (ICS), in India, is a project of the Reserve Bank of India (RBI), commenced in 2010, for faster clearing of cheques. CTS is based on a cheque truncation or online image-based cheque clearing system where cheque images and magnetic ink character recognition (MICR) data are captured at the collecting bank branch and transmitted electronically.

1. PRESENTATION ON:
NEGOTIABLE INSTRUMENTS
E- PURSE
TRUNCATION OF CHEQUE
PRESENTATION BY,
NAVYA JAYAKUMAR P
ROLL NO: 20

2. CONTENT
• NEGOTIABLE INSTRUMENT ACT, 1881
• NEGOTIABLE INSTRUMENTS
• FEATURES
• TYPES
• CHEQUE
• CHARACTERISTICS
• PARTIES
• TYPES
• CROSSING OF CHEQUES
• PROMISSORY NOTE
• FEATURES
• PARTIES
• BILL OF EXCHANGE
• FEATURES
• PARTIES

3. Continue…
• E PURSE
• BENEFITS
• CHEQUE TRUNCATION SYSTEM
• CHEQUE TRUNCATION
• BENEFITS
• HIGHLIGHTS

4. NEGOTIABLE INSTRUMENT ACT, 1881
• Negotiable Instruments Act, 1881 is an act in India dating from the
British colonial rule, that is still in force largely unchanged.
• An Act to define and Law relating to negotiable instruments which are
Promissory Notes, Bills of Exchange and cheques
• Enacted by Imperial Legislative Council (a legislature for British India
from 1861 to 1947)
• Enacted on 9 December 1881
• Commenced on 1 March 1882

5. NEGOTIABLE INSTRUMENTS
The word “ negotiable” means “transferable from one person to
another”
A negotiable instrument is a signed document that promises a sum of
payment to a specified person
Negotiable instruments are transferable in nature
Sec.13 of the Indian Negotiable Instrument Act, 1881 defines a
negotiable instruments as “ a promissory note, bill of exchange or
cheque payable either to order or to the bearer.”
Commercial banks also deal with these instruments. The bank
collects these instruments for the customers to grant loans and
advances against these instruments

6. FEATURES
• A contract to pay money
• It must be in writing and signed by the maker or drawer
• Must contain an unconditional order to pay a definite sum of money
• Must be payable on demand
• It can be used just like currency notes
• It can be transferred any number of times till the date of maturity
• Negotiable in nature because it allows the passing of its ownership from
one party (transferor) to another (transferee) by endorsement or delivery
• The right to take legal action against someone in a court of law (Right of
Action)

7. TYPES OF NEGOTIABLE INSTRUMENTS
PROMISSORY
NOTE
BILL OF
EXCHANGE
CHEQUE

8. CHEQUE
• A cheque is a negotiable instrument instructing a financial institution to
pay a specific amount of money from a person's account to the person in
whose name the cheque has been issued.
• According to SEC. 6 of the Negotiable Instruments Act, 1881, the
term cheque is defined as “a bill of exchange drawn on a specified banker
and not expressed to be payable otherwise than on demand.”
• The person writing the cheque, known as the drawer, has a transaction
banking account, where their money is held.
• The drawer writes the various details including the monetary amount, date,
and a payee on the cheque, and signs it, ordering their bank, known as
the drawee, to pay that person or company the amount of money stated.

10. CHARACTERISTICS OF CHEQUE
A cheque should be in writing and properly signed by the drawer
Must contain an unconditional order to pay a definite sum of money
Must be payable on demand
The cheque should bear a date otherwise it is invalid
Right of Action
A contract to pay money
The amount specified is always certain and should be clearly mentioned
both in figures and words
It must be drawn on a bank

11. PARTIES OF CHEQUE
• A check typically involves three parties:
1. The drawer who writes the check
2. The payee, to whose order the check is made out
3. The drawee or payer bank, the bank which has the
drawer's checking account from which the check is to be
paid.

13. TYPES OF CHEQUE
1. Bearer Cheque: It is a cheque which need not necessarily contain the
name of the payee, to whom the amount of the cheque is made payable. It
can be encashed by any person who bears or holds the cheque
2. Order Cheque: It is a cheque which contain the name of the payee, to
whom the amount of the cheque is made payable
3. Open Cheque: Any cheque that is not crossed
4. Crossed Cheque: It is basically any cheque which is crossed with two
parallel lines. It specifies a general instruction that the amount specified
in the cheque will be deposited directly on to the account of the Cheque
holder and will not be immediately delivered as cash to the holder over
the bank counter

14. CROSSING OF CHEQUE
• It provides instructions to a financial organisation regarding the handling of
funds.
• They are usually identified by drawing either two parallel transverse lines across
the face of the cheque with or without the word ‘&co’ or with the name of the
collecting banker between the lines
• Words like ‘and company’ or ‘not negotiable’ may be placed between the lines.
While just drawing the lines with no words also would not alter the purpose of
the crossed cheque.
• With Crossed cheques, can ensure safety of payment or from being stolen.
• Crossing are of two types
1. General crossing
2. Special crossing

15. GENERAL CROSSING
• The cheque bears across its face an addition of two parallel transverse
lines and/or the addition of words ‘and Co.’ or ‘not negotiable’
between them.
• The paying banker will pay money to any banker

16. SPECIAL CROSSING
• Cheque bears across its face an addition of the banker’s name between
the two parallel transverse lines
• The paying banker will pay the amount of cheque only to the banker
whose name appears in the crossing or to his collecting agent
• In special crossing two parallel transverse lines are not essential but
the name of the banker is most important

18. PROMISSORY NOTE
• A Promissory Note is a legal financial instrument issued by one party,
promising to pay the debt owed to another party.
• It is a written negotiable instrument duly signed by the maker that
contains an unconditional promise to pay the stated sum of money to a
particular person or to any other person, on the order of that particular
person, either on demand or on a specified date, under given terms.
• It is a short-term credit instrument

20. FEATURES OF PROMISSORY NOTE
• It is a written document.
• There must be a clear and unconditional promise to pay a certain sum
to a specified person or on demand.
• It must be drawn and duly signed by the maker.
• It must be properly stamped.
• It specifies the name of the maker and payee
• The amount to be paid must be certain, given in both figures and
words.
• Payment is to be made in the country’s legal currency.

21. PARTIES TO PROMISSORY NOTE
• Drawer: the person who makes a promissory note. He is also called the
promisor, the maker, the payer, the debtor.
• Drawee: the person in whose favor the promissory note is drawn and who is
meant to receive the payment. He is also called the promisee, the payee, the
creditor.
• Bearer: the person who holds a promissory note. He is also called the
holder. The bearer and the payee is usually the same person, but they can be
different.
• Endorser: the person who endorses a promissory note.
• Endorsee: the person in whose favor the promissory note is endorsed and
who receives it after endorsement. He becomes the new bearer and payee
after endorsement.

23. BILL OF EXCHANGE
• Bill of Exchange, can be understood as a written negotiable
instrument, that carries an unconditional order to pay a specified sum
of money to a designated person or the holder of the instrument, as
directed in the instrument by the maker.
• The bill of exchange is either payable on demand, or after a specified
term.
• In a business transaction, when the goods are sold on credit to the
buyer, the seller can make the bill and send it to the buyer for
acceptance, which contains the details such as name and address of the
seller and buyer, amount of bill, maturity date, signature, and so forth.

25. FEATURES OF BILL OF EXCHANGE
• An instrument which a creditor draws upon his debtor.
• It carries an absolute order to pay a specified sum.
• The sum is payable to the person whose name is mentioned in the bill
or to any other person, or the order of the drawer, or to the bearer of
the instrument.
• It requires to be stamped, duly signed by the maker and accepted by
the drawee.
• It contains the date by which the sum should be paid to the creditor.

26. PARTIES TO BILL OF EXCHANGE

27. ELECTRONIC PURSE
• It is a smart card with an embedded microchip. It provides multiple uses,
especially for types of payments
• A plastic card with a small amount of money stored electronically on it,
which can be used instead of cash to pay for things:
• A smart card becomes an electronic purse when money is credited to
the card via an electronic reader.
• This branchless banking model allows to dematerialize coins. Cards can be
loaded and used with any vendor and accredited point of administration.
The card can be used by the population to easily pay fees, shop or transfer
money to third parties. Authorities may also use the cards to pay social
benefits to qualified beneficiaries.

28. BENEFITS OF E-PURSE
•E-Purse is handy, clean and safe
•If lost or stolen, easy to block the card and transfer the credit to a new card
•Expense details provided online
•No face value on the card so no temptation to steal
•Transactions are quicker, more clients can be served
•Saves time and effort to sort petty cash
•More business as people spend more with virtual money
•No coin to mint
•No logistic for their distribution, no sorting equipment
•Transactions traceability
•Easier currency management

29. CHEQUE TRUNCATION SYSTEM
• Cheque Truncation System (CTS) is a cheque clearing system
undertaken by the Reserve Bank of India (RBI) for quicker cheque
clearance
• Cheque Truncation System (CTS) or Image-based Clearing
System (ICS), in India, is a project of the Reserve Bank of
India (RBI), commenced in 2010, for faster clearing of cheques.
• CTS is based on a cheque truncation or online image-based cheque
clearing system where cheque images and magnetic ink character
recognition (MICR) data are captured at the collecting bank branch
and transmitted electronically.

30. CHEQUE TRUNCATION
• Cheque truncation means stopping the flow of the physical cheques
issued by a drawer to the drawee branch.
• It involves the digitalisation of a physical paper cheque into
a substitute electronic form for transmission to the paying bank.
• The process of cheque clearance, involving data matching and
verification, is done using digital images instead of paper copies.
• Cheque truncation reduces or eliminates the physical movement of
paper cheques and reduces the time and cost of cheque clearance.
• Cheque truncation also offers the potential reduction in settlement
periods with the electronic processing of the cheque payment system.

31. BENEFITS OF CTS
• Time, money and manpower expended on physical transfer of cheques
from banks to clearing house are eliminated
• Clearing related frauds become less plausible
• Probability of cheques misplaced in transit is eliminated
• CTS is more advanced and more secure.
• It provides quicker clearance of cheques
• Reduces operational risk and risks related to paper clearing
• There are no extra charges levied for the collection of cheques drawn
on a bank located within the grid, further providing no geographical
restrictions

32. HIGHLIGHTS OF CTS CHEQUES
• All CTS cheques hold a watermark, with ‘CTS-INDIA’, which is
visible when held against any light source
• Pantograph (wavelike design) with hidden / embedded word ‘VOID’
become clearly visible in photocopies of a cheque