What is a Blank Cheque? Meaning, Risks and Legal Aspects Explained

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Jul 4th 2025

Finance

A blank cheque is a signed cheque but with certain conditions. Let us understand the key features of the blank cheque from the following table:

Key Feature	Description
Signed by Account Holder	Yes.
Payee Name	No. The name of the recipient is left blank.
Amount in Numbers	No. This field is empty.
Amount in Words	No. Also left empty.
Date	Optional. It may be left blank or filled in.
Risk Level	High. Misuse is possible if it falls into the wrong hands.
Legal Standing	Yes. It is legally valid once signed, even if other fields are blank.

A blank cheque is considered a negotiable instrument under the Negotiable Instruments Act, 1881.

When is a Blank Cheque Used?

There are specific scenarios and situations where blank cheques are required and used in India. The following are some of the cases where blank cheques are used:

Personal Loan Applications

When you apply for a personal loan, some banks or financial institutions may ask for a signed blank cheque. This is required for the following reasons:

To verify your bank account details.
To ensure that you have an active bank account.
As security for repayment in case of missed EMIs.

Trust-Based Transactions

Sometimes, people use blank cheques in family or business settings where there is a high level of trust. Let us understand this from an example:

Giving a blank cheque to a trusted employee to handle emergency payments.
Allowing a friend or family member to use it during a medical emergency.

Loan Security in Informal Lending

In many informal or private lending situations, lenders ask for a signed blank cheque to secure their money. This is not regulated and can lead to legal issues.

Setting up Auto-Debit Instructions

Some service providers may ask for a blank cheque to set up standing instructions or auto-debits for regular payments like:

Electricity bills
Insurance premiums
SIPs for mutual funds

How to Issue a Blank Cheque Safely

If you happen to be in one of the above situations and must issue a blank cheque, then we recommend the following instructions to reduce risk:

Use a blue or black pen only.
Do not leave it completely blank. You can write “Only for loan verification” across the cheque.
Always keep a record. Note down the cheque number, date, and the purpose. Take a photograph as well.
Issue to a trusted party only.
Avoid issuing post-dated cheques.
Inform your bank in case of misuse or misplacement of the blank cheque.

Do not issue a blank cheque until and unless it becomes an absolute requirement.

Validity of a Blank Cheque

The following are the rules laid by the RBI for the validity of blank cheques:

A cheque in India is valid for three months from the date mentioned on it.
If the cheque is undated, then the date written later will be considered.

Legal Implications of a Blank Cheque

The following are some of the legal implications that can arise due to a blank cheque:

If someone misuses a blank cheque, the issuer can face legal action.
Also, if you issue a blank cheque and the receiver misuses it, you may be held liable unless you can prove fraud.
If your cheque is bounced due to insufficient funds or fraud, you may face a penalty and even jail time.

Role of Blank Cheques in Personal Loans

In case of personal loans, blank cheques are usually used for loan verification and repayment setup. The following table explains how blank cheques are used in personal loans:

Role	Purpose
Bank Account Verification	Confirms that the account belongs to the loan applicant
Signature Matching	Used to verify the authenticity of the signature
IFSC Code Check	For setting up auto-debits through ECS or NACH
EMI Security	In case of default, a cheque may be used as a backup recovery tool

We strongly recommend that you always ask the lender to give you a written agreement regarding the use of your blank cheques.

Differences between a Cheque Leaf and a Blank Cheque

Many people confuse a cheque leaf with a blank cheque. But there are huge differences, as mentioned in the table below:

Parameter	Cheque Leaf	Blank Cheque
Filled Details	Can be filled or unfilled	Always signed, but details are left empty
Use	Common bank transactions	Used in special cases
Risk Level	Low	High
Example Use	Self-withdrawal, payments, deposits	Loan security, trust-based transactions

Digital Alternatives to Blank Cheques

With the advent of today's digital world, there are many safe alternatives to using blank cheques. The following are some of the alternatives:

Digital Option	Use Case	Safety Level
UPI	Instant money transfer	Very High
Net Banking	Scheduled payments, fund transfers	High
Standing Instructions	Recurring payments	High
Aadhaar-based eMandate	Loan and SIP auto-debits	Very High

Conclusion

In India, blank cheques are still used in many formal and informal transactions. They are a flexible tool but come with a high risk. With the growing use of digital banking, the use of blank cheques is reducing. However, they are still requested for personal loans, EMI setups, and business deals.

If you ever issue a blank cheque, make sure you trust the person completely and follow all safety guidelines. Also, keep a backup of documents and written agreements. In modern times, you can also explore secure digital payment systems like UPI and eMandates. If you want financial advice or want to use all BFSI services in one app, then InvestKraft is for you. All you need to do is visit InvestKraft and start your financial journey.