Why do businesses still want to use checks?
Checks are written date, signed, and dated instruments that direct a bank to pay a specific sum of money to the bearer. The person or company that writes the check is referred to as the payor or drawer, while the person to whom the cheque is made out is called the payee. The drawee on the other being is the financial institution on which the check is drawn.
The check can be cashed and they can be deposited. If the person who is paying presents cheques to a bank or other financial institution to negotiate, the funds are drawn from the payee’s bank account. It’s a different method for the bank to request that the institution transfer money from the payer’s account to the payee or the account of the payer. The majority of checks are written against a checking account, however, they may also be used to negotiate funds from a savings or any other type of bank account.
The Finance Ministry has declined the idea of a ban on chequebooks in favour of digital transactions saying the government has no plans to scrap it. Here’s the reason why Indian businesses love checking books.
India is experiencing a huge digital revolution, and just a word of the government’s decision to stop withdrawing chequebooks caused enough fury. And, why? Because companies still love chequebooks to transfer funds. Yes, India is moving -slowly — toward a cash-free economy, however, cheques have always been a source of value.
According to RBI figures, in August this year, there were cheques in the amount of around Rs 6,224.34 billion, more than three times the amount of debit card transactions and about 10 times more in comparison to mobile-based wallet transactions, even as digital transactions surged after the Demonetisation era. This is why businesses love chequebooks even in the age of going digital:
Chargeless:
Whatever it is, whether it’s digital transactions or other forms of the traditional financial instrument There is a cost associated with it. It is absolutely free to write a cheque.
Traditional:
Cheques have been an integral element of India’s payment landscape. Since the beginning, companies have developed a feeling of trust and confidence when it comes to making cheques. Additionally, alternatives like the ability to secure that future payments will be paid are possible with post-dated personalized photo checks.
Secure:
Digital transactions do not come without the threat of Cyber threats. Cheques are more secure, as they can be handed over to someone and then the person who received the money within his accounts. It is normal for businesses to select a safer method especially when a large sum is involved.
Convenient:
But, especially in India, where a majority populace is finding it difficult to adapt to the digital revolution, particularly in the rural and small regions, writing a check is easier than calling, entering the password, as well as ensuring the strength of the network Internet connection, etc.
However, cheques do have their disadvantages too. While online transactions are speedy while cheques take up to two days to be cleared, when they are safer in terms of cost, convenience and speed it is why businesses would switch to a different method of payment in the absence of motivation.
Pinky Khanna who is the Personal Tax specialist in EY India, says, “Cybersecurity risks, protection against frauds, and eliminating transaction charges from digital transactions are some of the most important actions that must be taken prior to the time when cheque books are phased out …. Additionally, educating the older generation and people living in smaller cities is crucial for making this a success.”