What is the main characteristic of a restrictive indorsement?

A restrictive indorsement primarily serves to limit the use of the instrument, such as a check. This type of indorsement contains specific terms that dictate how the instrument can be handled, typically specifying that it may only be deposited into a bank account and not cashed. This feature protects the instrument from being negotiated further without compliance with the stated restrictions.

In contrast, designating a particular payee relates more to a special indorsement, which allows for the transfer of the instrument to a specific individual. Conveying a qualified liability refers to a different aspect of indorsements that indicate a conditional obligation, while merely adding a signature does not impose any restrictions on the use of the instrument. Thus, the focus of a restrictive indorsement is its ability to limit how and where the financial instrument can be used.