March 27, 2026

What is Bankers Cheque?

As a creditor, are you worried whether your customer's cheque may bounce?

…..and that you will have sleepless nights?

What if you have to make some payment to the vendor and you don't have the beneficiary's relevant banking details?

For example, you only have the vendor's company name and address and the amount to be remitted.

When it comes to money matters, we all seek safety and validity of payment more than anything else, isn't it?

In all these situations, the banker's cheque or banker's draft or pay order is your 'go to' option.

Definition of a banker's cheque

To put simply, the bank issues this type of cheque on your behalf, which is drawn from its own funds ; whilst the customer pays the bank the amount either as cash or allows the bank to debit the corresponding amount from its account.

Once the bank has written the cheque, only then the amount is remitted to another entity, thus eliminating the scope of a cheque bounce.

Since the banker's cheque is issued by the bank itself, it is a non-negotiable instrument with zero credit risk and is valid for a period of three months and is typically processed within 24 hours after it has been deposited.

Key features of a banker's cheque

Issued by the bank itself
The corresponding amount is either paid as cash to the bank or the amount is debited from the customer's account.
Non- negotiable instrument
Valid for three months; option to revalidate the cheque once in 365 days.
Zero credit risk

Other nuances of banker's cheque are:
Name of the issuing ban
Payee's name - Amount to be remitted in words and numbers.
Printed signature of the cashier or senior signing bank executive
Authentication features watermark,security thread, colour-shifting ink and a special bond paper.
These cheques can be processed in any branch of the same bank within the city.
Therefore, banker's cheques have limited teritorial access.

Proforma of a Bankers Cheque:

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In addition to a banker's cheque, there are other types of cheques issued by banks for varying customer requirements.

Let us understand in detail the nuances of different types of cheques available within the banking ecosystem.

Different types of cheques:

Self cheque
- Account payee cheque
- Open cheque
- Travellers cheque
- Bearer cheque
- Pay yourself cheque ( PDC)
- Others- outstation cheque, at par cheque etc.

Before we get into the nuances of each cheque type, we need to appreciate that the overarching principle of using cheques versus other transaction channels is that cheques provide us the 'proof of payment', the records of which are maintained in the bank, physically and digitally.

Self-Cheque

As the name indicates, the drawer of the cheque is also the drawee, or the remitter is the same person or entity as the beneficiary. For example, when you need cash , you can write cheque as 'self' to withdraw funds from your account. An important caveat is to keep such cheques safely as it can lead to unauthorised withdrawal from your bank account, if anyone lays their hands on a ' self' signed cheque.

Account Payee Cheque

In this type of cheque, it strikes parallel lines on the top left corner of the cheque and then writes the payee or the beneficiary's name and amount. By doing so, the funds would only get transferred to that specific beneficiary's account ensuring a safe and secured mode of transfer.

Open Cheque

A cheque without any parallel lines drawn on the topmost left corner is called an open cheque or an uncrossed cheque. One can clear this cheque at any bank and the payee/beneficiary can encash the amount mentioned on the cheque. This type of cheque is transferable from the original beneficiary to another. The payer/issuer of the cheque is required to put his/her signature on the front and rear side of the cheque.

Traveller’s Cheque

When trotting around the globe, the traveller's cheque comes as handy as you can encash these cheques for your overseas travel rather than carrying physical money in your wallet.

Such cheques are issued by a bank in one country which can be cleared by another bank in another country in the relevant currency.

Traveller's cheques do not have an expiry date and can be utilised for travel purposes at a later date.

Bearer Cheque

In this type, the word bearer is printed on the cheque. The bearer or the carrier of the cheque can encash the amount when he/she presents this type of cheque to the bank.

The bank requires no other validation or authentication to clear this type of cheque.

As a consequence, the bearer's cheque if misplaced or stolen becomes susceptible to unauthorised access and fraudulent activity.

Pay Yourself Cheque

As the name indicates, these cheques are typically used for buying bank drafts, pay orders and fixed deposit receipts.

By simply crossing the cheque, the drawer indicates the bank to debit his/her account to the extent of the amount mentioned on the pay yourself cheque.

PDC

Post Dated Cheque is meant to be cleared at some distant date in future. Say for example, the drawer is a tenant and has issued eleven PDCs' which will be encashed by the owner of the apartment, on the specified date each month. PDCs carry a validity of three months.

Outstation (multi city cheque)

These cheques can be cleared at any place in the respective bank branch.

Frequently Asked Questions (FAQs):

Q. How can I get a banker's cheque cleared?

The process is fairly simple. All you need to do is to visit any branch of the bank which has issued the cheque within the local city limits. You then have to approach the cheque clearance section of the branch and present your banker's cheque tothem. Upon validation of your details, the bank will hand over the cash to you instantly to the extent of the amount mentioned in the cheque.

Q. Can a banker’s cheque transaction be reversed?

Banker's cheque is a non-negotiable instrument, issued by the bank itself and cannot be reversed. The cheque has to be honoured.

Q. Are there any service charges to be paid for availing a banker's cheque?

Yes, a service charge is applicable which varies in conjunction to the transaction amount.

Say for example**:**A fee of ₹25 is usually charged for an amount of ₹5,000.

Q. How does a banker's cheque differ from a demand draft?

While both are non-negotiable instruments, issued by the bank itself, the demand draft has a wider geographical spread in terms of clearance, implying that you could get your demand draft cleared from any branch of the issuing bank across the country. Whereas, in case of banker's cheque, the cheque encashment is limited within the city of the issuing bank.