A manager's cheque is a cheque that a bank draws on itself, after taking the money from your account (or from you in cash) up front. Because the bank is both drawer and payer, it cannot bounce for insufficient funds. The same instrument goes by different names: manager's cheque in the UAE and the Gulf, banker's cheque or pay order in India, and cashier's order or cashier's cheque in Singapore and some other markets.
You use one when the person you are paying needs certainty that the money is already there, which is why it is the standard instrument for property transfers, deposits and tenders.
How a manager's cheque works
- You ask your bank for a manager's cheque, at the branch or, at many banks, through online banking. You give the payee name and amount.
- The bank debits your account (plus its fee) immediately and issues the cheque, signed by its own officers.
- You hand it to the payee, who deposits it like any other cheque.
- It clears through normal clearing. The only question is whether it is genuine, not whether there are funds.
In India, since 15 September 2018, the RBI has required banks to print the name of the purchaser on the face of demand drafts, pay orders and banker's cheques, to reduce the anonymity these instruments used to give. Indian banks also issue instruments of ₹50,000 and above only by debit to an account or against a cheque, not for cash.
When you will be asked for one
- Property deals in the UAE. Dubai property transfers have traditionally been settled with manager's cheques at the trustee office on transfer day: one to the seller, others for fees and any mortgage settlement. Practice changes, so confirm with your trustee or agent exactly which cheques, made out to whom, they need.
- Security deposits and rent. Some landlords and developers want a manager's cheque for the deposit or first payment rather than a personal cheque.
- Car purchases and large one-off payments to sellers who do not know you.
- Tenders and bids, where an earnest money deposit must be guaranteed.
- Government and court payments in some cases, and loan settlements where the lender wants guaranteed funds.
- India. Pay orders and banker's cheques are used for local payments of fees, deposits, tenders and property registration-related payments. Demand drafts are used where the payment needs to be payable in another city.
Manager's cheque vs demand draft vs personal cheque
| Personal cheque | Manager's cheque / pay order | Demand draft | |
|---|---|---|---|
| Drawn by | You, on your account | The bank, on itself | The bank, on one of its branches or a correspondent |
| Money leaves your account | When it is presented | When it is issued | When it is issued |
| Can bounce for funds | Yes | No | No |
| Where payable | Your bank, through clearing | Usually the issuing bank, in the same city or country | A named place, often another city |
| Can be post-dated | Yes | No: issued for immediate use | No |
| Can be stopped | Yes, before payment | Only through the bank's cancellation or lost-instrument process | Same |
| Cost | Usually none per cheque | A per-instrument fee | A commission, often based on amount |
In India the line between a pay order (or banker's cheque) and a demand draft is mainly about location: pay orders for local payment, drafts for payment elsewhere. With core banking and multicity cheques, the difference matters less than it used to. See demand draft vs cheque for the wider comparison.
Validity
India. Banker's cheques, pay orders and drafts follow the same rule as ordinary cheques. Since 1 April 2012 they are valid for three months from the date of the instrument. After that, take it back to the issuing bank to have it revalidated or cancelled and refunded.
UAE. The Commercial Transactions Law sets a six-month presentation period for cheques, and manager's cheques are generally treated the same way. Some banks print their own validity on the instrument. Check the face of the cheque and confirm with the issuing bank if you plan to hold one for a while. Other Gulf countries set their own periods. See cheque validity.
Cost
Banks charge a fee per manager's cheque or pay order. Some premium or business accounts include a number free each month. Demand drafts in India are usually priced as a commission that rises with the amount. Fees are in each bank's schedule of charges and change over time, so check before you order several for a property deal.
Cancellation, loss and refunds
- If you no longer need it, return the original to the issuing bank with a cancellation request. The bank credits the amount back to your account, usually minus a cancellation fee. Only the purchaser can normally cancel it, and only while it is unpaid.
- If it is lost, tell the issuing bank immediately. Expect to provide a written request, an indemnity and possibly a police report. In the UAE a police report is standard for lost cheques, as explained in our guide to a lost cheque book. Banks often wait for a period before issuing a duplicate or refund, to make sure the original has not been paid.
- If the deal falls through after you have handed it over, you need the original back. You cannot simply stop it as you would a personal cheque.
Can a manager's cheque be fake?
Yes, and that is the real risk with them. Fraudsters use counterfeit manager's cheques to "pay" for cars, goods or deposits, then disappear before the fake is discovered. If you are receiving one for a large amount, verify it with the issuing bank using a phone number you find yourself, not one printed on the cheque. Better still, deposit it and wait for it to clear before you hand over anything. Banks also return them for technical defects like any other cheque. See cheque security features for what genuine stationery looks like.
