Banking Term : Payment Order

Find important banking term that is useful in upcoming banking exam

Created On: Oct 13, 2015 17:09 IST
Modified On: Feb 18, 2016 12:11 IST

Payment order is a term that is used internationally for instructing banks/other financial institutions to make payment or series of payments to third party. Instructions can be given in the form of paper or/and electronic means. A payment order is also called as banker’s cheque and payable at the issuing bank. It is issued for the local/international use and its payment depends upon the vicinity prospects.


 There are following conditions in favor of instruction:-

  1. In payment order instruction time of payment is not mentioned.
  2. The receiving bank is to be reimbursed by debiting an account.
  3. The instruction is transmitted by the sender directly for transmittal to the receiving bank.

When you post a payment order, the system generates payment items from the payment order items/positions that are updated on the respective accounts as specified in the order. A payment order is only a group of payment items, and does not actually represent a posting. A payment order always has a balance of zero.

Types of Payment orders: - There are various types of payment orders:-

  1. Internal payment orders: - It is used when recipients/paying parties are in same bank/financial institutions. Under this scheme, system checks in BCA (Bank customer accounts) that recipient account existed or not. If not, then recipient item is transferred to the external payment transaction system.    
  2. External payment orders: - When paying bank and recipient bank are in the same bank then the recipient items are forwarded to the external transaction system for further processing.
  3. Foreign Payment orders: - Payment orders when recipient bank is situated abroad. Then, name of that country is also to be entered on the entry screen.

Comment ()

Related Categories

Post Comment

2 + 1 =