What is a Banker’s Cheque

A banker’s cheque is a type of cheque which is issued by your bank on your behalf to be paid to the payee. The Banker’s Cheque is also known as Pay Order in India. Let’s find out more about a banker’s cheque.

What is a Banker’s Cheque?

A banker’s cheque is a type of payment instrument in India. This is a type of cheque which you, as an individual, cannot issue. This is used only by the banks to make payments on behalf of their customers. A Banker’s cheque is payable only at the branch of issue and is used for payments within the local clearing jurisdiction.

Banker’s Cheque Validity

Just like any other type of cheque, a banker’s cheque is also valid for 3 months from the date of issued. However, the validity of a banker’s cheque may be increased upon providing the same in writing at the issuing branch. Earlier it used to be 6 months but RBI reduced this period to 3 months on 1^st April 2012.

Difference between Banker’s Cheque and Demand Draft

Although, a banker’s cheque and a demand draft both have similar functions and features, there is one major difference between the two:

A demand draft can be deposited at any branch of the issuing bank whereas in case of a banker’s cheque, it is not the case. A Banker’s Cheque can only be deposited at the issuing branch and nowhere else.

Both the instruments are the safest form of making payments offline and without cash. There is no chance of a banker’s cheque being bounced as the amount is already deducted from the issuer’s account and the same applies to a demand draft as well. 

How to Write a Banker’s Cheque?

Here are the steps to write a banker’s cheque in India:

1. Fill in the Payee’s name: Write the name of the person or organization that will receive the payment on the “Pay” line.
2. Fill in the Amount: Write the amount to be paid in both numbers and words in the “Amount” section of the cheque.
3. Fill in the Date: Write the date on which the cheque is being issued in the “Date” section of the cheque. Ensure the date is the current date or a future date as per requirement.
4. Fill in the Signature: Sign the cheque in the signature section at the bottom right corner of the cheque.
5. Mention the Purpose: In the optional ‘Remarks’ or ‘Purpose’ column, mention the purpose of issuing the cheque, e.g., payment of fees, deposit for investment, etc.
6. Handover the Cheque: Once the cheque is filled and signed, hand it over to the bank’s teller or designated person to issue the Banker’s Cheque.

How to Deposit a Banker’s Cheque?

To deposit a banker’s cheque, the payee needs to visit the issue branch, i.e. the branch at which the cheque was initially issued. Then present the cheque at the counter and present your ID as well. Once your ID is checked by the banker, you are required to sign a declaration in the bank’s register that you have received the amount. And that’s how you deposit a banker’s cheque.

Other Types of Cheques

In India, there are several types of cheques that are commonly used, including:

1. Bearer Cheque: A bearer cheque is a cheque that is payable to the person who presents it to the bank, and it can be transferred to another person by endorsement.
2. Order Cheque: An order cheque is a cheque that is payable only to the person named on the cheque or their order, and it cannot be transferred to another person.
3. Crossed Cheque: A crossed cheque is a cheque that has two parallel lines drawn across it, indicating that it can only be paid into a bank account and cannot be cashed over the counter.
4. Account Payee Cheque: This cheque is the most secure type of cheque. It can neither be encashed nor be transferred. Only the person whose name is written on the cheque can deposit this at their branch.
5. Post-dated Cheque: A post-dated cheque is a cheque that is dated for a future date, and cannot be cashed until that date.
6. Stale Cheque: A stale cheque is a cheque that is presented for payment after three months from the date of the cheque, and it is not valid for payment.
7. Cancelled Cheque: A cancelled cheque is a cheque that has been cancelled by drawing two lines across it, and it is used as proof of bank account details.

Also, read more articles related to Cheque:

Banker’s Cheque: FAQs