Payment Order is a widely used Bank instrument for making and settlement of business as well as individual financial transactions. Payment Order is the safest method of payment settlement for a purchase bill or so on.
A payment order is an order to pay the amount to the actual payee mentioned in the Payment Order. And it is also secured because its payment authority is only the issuing bank branch. In our country payment order is mostly used for settlement of a purchase bill, payment of job application fees, fees for submitting a tender, encashment cheque of various deposit schemes of the bank and so on.
Sometimes Payment Order is issued for cash withdrawal in case of unavailability of account holder’s cheque book leaves. Here we know about the basic rules for issuing a payment order and its features;
What is Payment order?
The payment order is a financial instrument which is issued from a certain branch of a bank on behalf of the customer and must be encashed from the same branch. A payment Order is an order to pay a specified amount to the specified person or organization mentioned in the payment order.
Read Also: How to write a Bank Cheque?
Unlike cheque, there is no possibility of dishonoring pay order because issuing bank receives money in advance from the customer before issuing Payment Order.
Payment order and its features:
01. Payment Order can be used to deposit and encashment
02. No possibility of being dishonored unless it is fake or canceled.
03. There is no validity period for Payment. Any time a payment order can be encashed in good faith of the issuing bank branch.
04. Payment order is not a negotiable instrument because it can’t be endorsed or transferred.
05. Payment order issuing branch and payment branch are the same.
06. Payment can be made within the clearing house area of the issuing bank branch.
07. Payment order may be open or crossed.
08. Payment of a payment order can also be made through the cancellation of Payment Order.
Application procedure of Pay order:
01. The purchaser should fill in the application form mentioning the payee name and amount along with commission and other charges imposed by issuing bank.
02. Pay the Payment order amount. The purchaser can pay either in cash or debit his maintained account with the issuing bank.
03. In the case of cash, cash officials will receive money against Payment order.
04. In case of debiting purchaser account through cheque before debiting cheque, respective official examines the cheque Genuity and then debit purchaser account.
05. Then Payment Order issued by the dedicated official mentioning the payee name as mentioned the Payment Order application form, amount and handover it to the purchaser.
06. Before handover The Payment Order must be signed by two Authorized Officer.
Payment procedure of Pay order:
1. If a Payment order is presented for encashment it should be paid to the payee or beneficiary after proper verification of it. It may be paid in cash or credited to his/her account. Most of the cases payment order issued as crossed for account transfer.
2. A Payment order may be transferable subject to proper discharge on its backside. For example, the Payment Order is issued in favour of Executive Engineer, LGED to participate in a tender. If the purchaser failed to get the tender, the LGED office will return the Payment Order by releasing the same by signing at the back by the Tender issuing Authority. For query or verify the discharge Genuity can contact the discharging authority.
3. Before making payment, the branch official will verify the signature of the purchaser from the Payment order Application Form or from the part of the payment order which is stored at the time of issuing payment order.
4. If a Payment order is collected on behalf of the payee the collecting bank should affix the endorsement ‘Payee account credited or will be credited’.
Cancellation of Payment Order (PO):
A payment order may be canceled for various reasons. As per the purchaser request the following procedure will be followed by the bank for refund of Payment Order by cancellation:
1. The purchaser should submit a written request mention reason for refund of pay order.
2. The purchaser should submit the original Payment Order with the application.
3. Signature of the purchaser will be verified by the branch official from the original Payment order Application Form or from the part of the payment order which is stored at the time of issuing payment order.
4. Branch official will verify that there is no duplicate Payment Order has been issued.
5. The Payment Order should be affixed with a stamp ‘canceled’ under proper authentication and duly signed by the authorized officer.
6. Cancellation charge should be taken from the purchaser as cancellation charge fixed by the bank. Mostly 100/- +15% vat taken by the bank for cancellation of a Payment Order.
7. After completing all procedures authorized officer transfers the Payment Order amount to the purchaser account. If the purchaser doesn’t have an account with the bank then the authorized officer will issue a Pay-in-slip/ Pay-slip in favor of the purchaser. And this Pay-in-slip/ Pay-slip will be paid in cash over the counter.
In case of a lost Pay order:
If Payment order is missing or fall in any wrong/deceitful hands. The purchaser of the Pay order first lodge a General Dairy (GD) and as soon as possible inform the Bank about the loss of Payment order. Bank has the provision of issuing a duplicate payment instead of the lost one. For that purchaser has to made a request for issuing a Duplicate Pay order along with his GD for proof of instrument loss. Bank will inform by internal circular to all of their branches to not make payment or receive the lost payment order. Then upon the purchaser’s request bank issue a duplicate payment order as the lost one.
When bank Issues a Duplicate Payment order?
When the bank is informed about the loss of instruments by the purchaser and receives a written application from the purchaser of the Payment order for issuing duplicate payment order.
Procedure for issuing a duplicate payment order:
01. First of all, a written application must submit by the purchaser along with a General Diary (GD) copy.
02. The signature of the applicant will be verified by the branch official from the original application.
03. Branch will make necessary arrangements for approval of their concerned authority for issuing duplicate one.
04. Head office will verify either the lost payment order was received by any of their branches or not for that they will issue a lost instrument circular and give permission to the respective branch for issuing a duplicate payment order.
05. Now branch will take An Indemnity Bond must be affixed with the special adhesive stamp of acceptable value from the purchaser for future security.
06. Bank issue a new Payment Order as marked Duplicate in the Payment order. And pen through the new number which is replaced with the lost Payment order number in red ink.
07. Must be signed by two authorized signatories and handed over to the customer.
Pay Order Issue & Cancel charge:
Issue charge: (May vary as Bank their own policy).
Up to Tk. 1,000/-= Tk. 20/-+15% vat.
Up to Tk. 1,001/- to Tk. 1,00,000/-= Tk. 25/-+15% vat.
Above Tk. 1,00,000/-= Tk. 50/-+15% vat.
Cancelation charge: (May vary as Bank their own policy).
Tk. 100/-+15% vat.
Duplicate issue charge: (May vary as Bank their own policy).
Tk. 500/-+15% vat.
FAQs:
01. What is the validity period of Payment Order?
There is no specific validity period for payment order. You can submit a payment order to the issuing bank anytime for encashment.
02. Is Payment order paid in cash?
Mostly Payment order are made for Account payee transactions for the settlement of debt for purchasing goods and services. But sometimes banks are using Payment order for making maturity settlements of bank’s various deposit products which will be paid in cash over the counter.
03. How do I cancel a payment order?
A payment order may be canceled upon the request of the actual purchaser of the Payment order as per bank authority’s satisfaction of justification made for cancellation of the payment order. Purchaser has to submit an application along with the Payment order. Cancelation charge may be applied by the bank.
04. Is Banker’s cheque and pay order same?
Payment order is often called Banker’s cheque. Because Payment order is issued by a bank on behalf of the purchaser for the settlement of his dues of a certain amount. For issuing this bank receive the money from the purchaser in advance. For this payment bank issues Payment order as cheque on behalf of the bank.