Negotiable Instruments and Payment Systems
Negotiable instruments
This domain tests the Negotiable Instruments Act, 1881 and modern payment channels. Section 13 defines a negotiable instrument as a promissory note, bill of exchange, or cheque payable either to order or to bearer. A cheque is a bill of exchange drawn on a specified banker and payable on demand. Crossing affects payment: a generally crossed cheque is paid through a bank, and an account payee crossing restricts payment to the named payee's account. Endorsement transfers rights, and the holder in due course takes free of certain defects. A draft is a banker's order and is not a cheque.
Payment systems
NEFT settles batches and has no minimum; RTGS is for high-value, real-time gross settlement with a minimum of ₹2 lakh and no upper limit; IMPS is immediate, 24x7 retail interbank transfer; UPI is a mobile interface operated by NPCI. Cheque validity is three months from the date of the instrument. Dishonour for insufficiency of funds attracts Section 138 consequences after notice and time limits.
Worked example
A cheque is crossed 'account payee' and the drawer wants to transfer it to a third party by endorsement. Reasoning: the crossing is a direction to the collecting banker to credit only the named payee's account. A third-party endorsement is ineffective for collection. The mark restricts negotiability in practice, even though the instrument remains a cheque.
Traps
Do not call a bank draft a cheque. Do not apply the RTGS minimum to NEFT. Do not ignore crossing. Do not say a post-dated cheque is invalid; it is payable on or after its date.