What is Cheque Discounting?

23Nov, 23

What is Cheque Discounting?

There will always be pressing requirements. One can wake up and satisfy an urgent demand, and the company for which you work can write a check to pay off the debt. However, because a cheque is a piece of paper, it must be cleared before it can be cashed. Nonetheless, as long as you pay a fee, you can take instant cash or exchange the amount stated on the cheque for cash. This is after they do a thorough examination to guarantee that the check is authentic.

Cheque discounting is a practice followed by a number of banking and financial institutions. It allows a consumer to deposit a check or receive cash based on their reputation and comprehensive checks before clearing your check. They do, however, deduct interest or discounted costs from each check.


Before cashing a check that has been rendered for clearing, various procedures must be met. These are the requirements:

  • They write checks to trusted and renowned institutions or organizations where the drawer has no previous delinquent checks.
  • The customer who is requesting a discount must have previously received a check from the same drawer.
  • The check's entire amount must be reasonably active for at least six months.
  • Personal, linked entity and foreign currency cheques are not eligible for discounting.

Operation of Cheque Discounting in Uae

The procedure via which the cheque discounting operates is explained below-

  • Due to the fact that the financial institution will receive payment of this cheque on the due date from the client's customer, one must be a creditworthy customer to use the service, and the cheque must be dated within 90 days after the discounted date.
  • Check the cheque thoroughly to avoid bounced cheque. The value of the cheque is promptly credited to the account holder of the cheque by financial institutions.
  • You have the option of drawing a larger cheque. However, you have the choice of having the cheque exchanged for cash with a broker or having the bank ‘purchase' the cheque; the bank branch purchases the cheque according to the bank's policy.
  • The branch or broker may credit up to 75% to 80% of the value of the cheque (depending upon your credit worthiness).
  • The amount credited to your account is after the commission is deducted otherwise the bank regards the transaction as a loan. However, due to the bank's policy, it is subject to a specified rate tariff.
  • Out-of-pocket expenses incurred in the process of collecting the proceeds of the cheque are removed from the money obtained when going via the bank.
  • The remitting bank may additionally deduct its fees for sending the money.
  • When the remittance from the payee bank is received, the outstanding against the cheque purchased is paid off; if the remittance received is less than the amount advanced to you, you must reimburse the outstanding amount as well.

Dhanguard is the Best Banking Consultant and Business Setup Consultant in Dubai and UAE. Dhanguard provides financial services like Business Account, Business Loans, Home Loan & Investments services in Dubai and UAE.