Endorsement means the payee signs the back of a cheque to transfer it to another person, who can then bank it. The new holder is the endorsee.
The forms
- Blank endorsement — the payee just signs. The cheque becomes payable to whoever holds it, much like a bearer cheque.
- Full endorsement — the payee names the person it is being transferred to, then signs.
- Restrictive endorsement — wording such as "for deposit only", limiting what can be done with it.
Mostly theoretical now
Endorsement features heavily in textbooks and rarely in practice. Most banks in India will not accept an endorsed cheque for a third party, and an account payee marking prohibits it outright — which covers the large majority of business cheques.
So if you are planning to pass a cheque on rather than bank it, check with the bank first. Assume it will not be possible.
What you actually need to know about the back of a cheque
For most people the reverse matters for two practical reasons rather than for endorsement:
- Bank stamps and processing marks go there.
- Deposit details — some businesses print an account number or reference on the back.
If you print on the reverse, keep clear of the endorsement area so bank markings have room. See printing on the back of a cheque.
If you are handed an endorsed cheque
Be careful. You are relying on an endorsement chain you cannot verify, and if the bank refuses it you have no direct relationship with the person who wrote it. A fresh cheque from the payer, or a transfer, is a much better position to be in.
