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Banking Transaction : Cheque Types, MICR, CTS Truncation, Negotiable Instrument Act - Economics, UPSC mains Exam Video Lecture
FAQs on Banking Transaction : Cheque Types, MICR, CTS Truncation, Negotiable Instrument Act - Economics, UPSC mains Exam Video Lecture
| 1. What are the different types of cheques used in banking transactions? |  |
Ans. There are several types of cheques used in banking transactions. Some common types include bearer cheques, order cheques, crossed cheques, post-dated cheques, and stale cheques. Bearer cheques are payable to the person who presents the cheque to the bank. Order cheques are payable to a specific person or entity and require their endorsement. Crossed cheques have two parallel lines across the face of the cheque, indicating that the amount can only be deposited into a bank account and not be encashed over the counter. Post-dated cheques have a future date written on them, and they can only be cashed or deposited on or after that date. Stale cheques are those that are presented for payment after a specified period, usually six months, from the date of issue.
| 2. What is MICR and how is it relevant in banking transactions? | |
Ans. MICR stands for Magnetic Ink Character Recognition. It is a technology used in banking to facilitate the processing of cheques. MICR code is a unique combination of numbers and characters printed at the bottom of cheques. These codes represent the bank's branch, account number, and cheque number. MICR technology enables high-speed and accurate processing of cheques through automated machines. When a cheque is deposited or cleared, the MICR code is read by the machines, and the transaction is processed accordingly. It helps in reducing errors and frauds in cheque processing, making banking transactions more efficient and secure.
| 3. What is CTS truncation and how does it affect banking transactions? | |
Ans. CTS truncation refers to the process of truncating or removing the physical movement of cheques in the clearing process. Earlier, physical cheques used to be transported between banks for clearing, which was time-consuming and involved the risk of loss or damage. With CTS truncation, the cheques are scanned and their images are transmitted electronically for clearing. The physical cheques are retained by the bank where they are deposited. This process increases the speed and efficiency of clearing cheques, reduces the cost and risk associated with physical transportation, and enables faster realization of funds in banking transactions.
| 4. How does the Negotiable Instruments Act impact banking transactions involving cheques? | |
Ans. The Negotiable Instruments Act is a legislation that governs the rules and regulations related to negotiable instruments, including cheques, in India. It provides legal framework and guidelines for the issuance, acceptance, payment, and dishonor of cheques. The Act defines the rights and liabilities of parties involved in cheque transactions, such as the drawer, payee, and drawee (bank). It establishes the validity and enforceability of cheques as negotiable instruments and outlines the consequences of dishonoring a cheque, including legal remedies for the aggrieved party. The Act plays a crucial role in ensuring the smooth functioning and reliability of banking transactions involving cheques.
| 5. How can knowledge of banking transactions and related laws be useful for UPSC mains exam preparation? | |
Ans. Knowledge of banking transactions and related laws is relevant for UPSC mains exam preparation, especially in the economics section. The banking sector is an integral part of the Indian economy, and understanding its functioning, regulations, and impact on various stakeholders is important for a comprehensive understanding of the economy. Questions related to cheques, MICR, CTS truncation, and the Negotiable Instruments Act can be asked in the economics paper of UPSC mains exam. Familiarity with these topics can help candidates answer such questions accurately and demonstrate their understanding of the banking sector's role in the economy.
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Nov 09, 2024 Last updated |
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