Correct Option
The correct option is 2 only
Explanation
A cheque is a negotiable instrument used to transfer money from a bank account. It serves as a written instruction by an account holder to their bank to pay a specific sum to a designated person or entity. Unlike currency, cheques are considered fiduciary money, meaning their acceptance depends on the trust between the payer and the payee.
Statement-wise Analysis
- Statement 1 is Incorrect: The primary function of a cheque is to facilitate the settlement of transactions and payments without the physical exchange of cash. It acts as a medium of exchange in the banking system, allowing funds to be transferred directly between accounts.
- Statement 2 is Correct: A cheque is an instruction given by the payer (the drawer/account holder) to the bank (the drawee) to pay a specific amount to the payee. The statement incorrectly suggests that the payee instructs the bank to withdraw money; in reality, the authority and instruction originate from the account holder (payer) who signs the cheque.
- Statement 3 is Incorrect: Cheques are not currency, nor are they issued by the Reserve Bank of India (RBI). Currency (notes and coins) is fiat money issued by the central bank or government and is legal tender. Cheques are financial instruments issued by individual account holders against their demand deposits and are not legal tender (a payee can refuse to accept a cheque).
Key Takeaway
Key Takeaway: A cheque is a negotiable instrument drawn by an account holder (payer) instructing the bank to pay a specific amount; it is fiduciary money, not legal tender or currency issued by the central bank.