Understanding Payment Instructions in Banking

The question asks to identify the term for a paper document that instructs a bank to transfer a specific amount of money from one person's account to another person named on the document. Let's examine the options provided to determine which one fits this description.

Analyzing the Options

• Cheque: A cheque is a written, dated, and signed order instructing a bank to pay a specific amount of money to the person named on the cheque or to the bearer from the account of the person writing the cheque. This description perfectly matches the definition given in the question. It is a paper instruction from the account holder to the bank.
• Recurring deposit: A recurring deposit (RD) is a scheme where a person deposits a fixed amount of money regularly (usually monthly) for a specific period. It is a savings instrument, not a paper instruction for payment to a third party.
• Fixed deposit: A fixed deposit (FD) is a financial instrument provided by banks which provides investors with a higher rate of interest than a regular savings account, until the given maturity date. It is a lump-sum investment for a fixed period, not a paper instruction for payment to a third party.
• Debit card: A debit card is a payment card that deducts money directly from a consumer’s checking account when used for purchases. While used for payments, it is a plastic card used for electronic transactions, not a paper instruction issued to the bank to pay a specific amount from the account to a named person.

Conclusion

Based on the analysis of the options, the term that correctly describes a paper instructing the bank to pay a specific amount from a person’s account to the person in whose name the paper has been issued is a Cheque.

Therefore, a Cheque is the correct answer.

Revision Table: Understanding Banking Terms

Let's quickly review the key terms discussed related to banking operations and instruments.

• Cheque: A negotiable instrument used as a form of payment. It's a paper document.
• Recurring Deposit: A savings scheme involving regular deposits.
• Fixed Deposit: A lump-sum investment providing fixed returns.
• Debit Card: An electronic payment card linked to a bank account.

Additional Information: Cheque Payment System

The use of cheques is a traditional method of making payments. The person writing the cheque is called the drawer, the bank on which it is drawn is the drawee, and the person to whom the payment is to be made is the payee. Cheques can be crossed to ensure the payment is credited only to the payee's account, adding security. While electronic payments have become more common, cheques are still used in many transactions.