Consider the following statements regarding the 'Cheque' facility: 1. The payee instructs the bank to withdraw money from the payer's account. 2. It allows for the direct settlement of payments without the use of cash. 3. Cheques are a form of currency issued by the RBI. Which of the statements given above is/are correct?

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.

NCERT Class 10 Economics — Chapter 3: Money and Credit

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Consider the following statements regarding the 'Cheque' facility:

The payee instructs the bank to withdraw money from the payer's account.
It allows for the direct settlement of payments without the use of cash.
Cheques are a form of currency issued by the RBI.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A1, 2 and 3
B1 and 3 only
C1 only
D2 only

Did you get this right?

Solution

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.

Your note

More from Chapter 3: Money and Credit

Consider the following statements regarding the impact of high cost of borrowing: 1. A larger part of the earnings of the borrowers is used to repay the loan. 2. The repayment amount is always less than the income of the borrower. 3. It may discourage people from starting enterprises due to the debt burden. Which of the statements given above is/are correct?

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With reference to the credit needs in rural areas, consider the following statements: 1. The main demand for credit is for crop production. 2. There is no time gap between buying inputs and selling the crop. 3. Repayment of the loan is crucially dependent on the income from farming. Which of the statements given above is/are correct?

medium

Consider the following statements regarding the 'Krishak Cooperative': 1. It does not accept deposits from its members. 2. It uses deposits as collateral to obtain a large loan from the bank. 3. It provides loans for various purposes including house construction. Which of the statements given above is/are correct?

medium

Consider the following statements regarding the supervision of credit activities in India: 1. The World Bank supervises the functioning of formal sources of loans. 2. There is no organisation that supervises the credit activities of lenders in the informal sector. 3. Banks are not required to share any lending information with the RBI. Which of the statements given above is/are correct?

medium

With reference to Cooperative Societies, consider the following statements: 1. They are a major source of cheap credit in rural areas. 2. Members operate individually without pooling resources. 3. Cooperatives cannot obtain loans from banks; they must rely solely on member deposits. Which of the statements given above is/are correct?

medium

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Correct Option

The correct option is

2 only

Explanation

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).