A cheque returned by bank marked NSF means that
- A.Bank cannot verify your identity
- B.There are not sufficient funds in your account
- C.Cheque has been forged
- D.Cheque cannot be cashed being illegal
Correct answer
Explanation
The correct answer is B, there are not sufficient funds in your account. NSF stands for not sufficient funds, and a bank writes it on the return memo when the balance in the drawer's account is less than the amount of the cheque. This is the ground that attracts Section 138 of the Negotiable Instruments Act, 1881, under which issuing such a cheque is an offence punishable with imprisonment up to two years, or a fine up to twice the amount, or both.
Option A describes a know your customer problem, which is dealt with separately and is not what NSF means. Option C, forgery, is returned with a remark about the signature differing or the instrument appearing altered, and material alteration is covered by Section 87. Option D is not a banking return reason at all. Only the shortage of balance is described by the letters NSF.
Read the full article: Negotiable Instruments and Cheques: Act, Sections and PYQs
Practice Questions
View allA paper instructing the bank to pay a specific amount from a person's account to another person in whose name it has been issued is known as:
- A.cash
- B.cheque
- C.passbook
- D.currency
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Section 6 of the Negotiable Instruments Act, 1881 defines a cheque as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.
Read the full explanation →Negotiable Instrument Act was introduced in
- A.1972
- B.1881
- C.1957
- D.1950
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The Negotiable Instruments Act was enacted in 1881 and came into force on 1 March 1882.
Read the full explanation →The payment of a negotiable instrument becomes due
- A.at maturity
- B.after maturity
- C.before maturity
- D.on third day of maturity
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Section 22 of the Negotiable Instruments Act, 1881 says that the maturity of a promissory note or bill of exchange payable otherwise than on demand is the date on which it falls due, and the three days of grace are already counted in arriving at that date.
Read the full explanation →Which section of the Negotiable Instruments Act, 1881 defines a cheque?
- A.Section 4
- B.Section 5
- C.Section 6
- D.Section 13
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Section 6 says a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand, and it goes on to include the electronic image of a truncated cheque and a cheque in the electronic form, both added by the amendment…
Read the full explanation →Dishonour of a cheque for insufficiency of funds in the account is dealt with under which section of the Negotiable Instruments Act, 1881?
- A.Section 118
- B.Section 123
- C.Section 130
- D.Section 138
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Section 138 makes it a criminal offence to issue a cheque that is returned unpaid because the account has insufficient funds or because the amount exceeds the arrangement made with the bank.
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