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    What Is A Demand Draft?

    Uploaded by

    Mady Studio
    A demand draft is a negotiable instrument issued by a bank directing another bank or its own branch to pay a specified amount to the payee. It provides a safe and secure payment since the drawer must pay the bank before the draft is issued. Demand drafts are similar to cashier's checks in the US but take longer to clear through the national clearing house in India (7-15 days vs next business day). Anyone can request a demand draft by filling out a form with details of the beneficiary and payment, which can be made by cash or check along with applicable fees.

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    © All Rights Reserved
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    What Is A Demand Draft?

    Uploaded by

    Mady Studio
    42 views6 pages
    A demand draft is a negotiable instrument issued by a bank directing another bank or its own branch to pay a specified amount to the payee. It provides a safe and secure payment since the drawer must pay the bank before the draft is issued. Demand drafts are similar to cashier's checks in the US but take longer to clear through the national clearing house in India (7-15 days vs next business day). Anyone can request a demand draft by filling out a form with details of the beneficiary and payment, which can be made by cash or check along with applicable fees.

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    simran

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    A demand draft is a negotiable instrument issued by a bank directing another bank or its own branch to pay a specified amount to the payee. It provides a safe and secure payment since the drawer must pay the bank before the draft is issued. Demand drafts are similar to cashier's checks in the US but take longer to clear through the national clearing house in India (7-15 days vs next business day). Anyone can request a demand draft by filling out a form with details of the beneficiary and payment, which can be made by cash or check along with applicable fees.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    42 views6 pages

    What Is A Demand Draft?

    Uploaded by

    Mady Studio
    A demand draft is a negotiable instrument issued by a bank directing another bank or its own branch to pay a specified amount to the payee. It provides a safe and secure payment since the drawer must pay the bank before the draft is issued. Demand drafts are similar to cashier's checks in the US but take longer to clear through the national clearing house in India (7-15 days vs next business day). Anyone can request a demand draft by filling out a form with details of the beneficiary and payment, which can be made by cash or check along with applicable fees.

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    Demand Draft

    What is a Demand Draft?

    A demand draft or a DD is a negotiable


    instrument issued by the bank. The meaning of
    negotiable instrument is that it guarantees a
    certain amount of payment mentioning the name
    of the payee. It cannot be transferred to another
    person in any situation.

    The bank issues the draft to a client (drawer)


    directing another bank or own branch to pay the
    specific amount to the payee. Demand drafts can
    be compared to cheques but these are hard to
    counterfeit and more secure. This is because the
    drawer has to pay before issuing a demand draft
    to the bank whereas cheque can be issued
    without ensuring the sufficient funds in your
    bank account. Therefore, cheques can bounce
    but drafts assure a safe and on-time payment.

    The drafts are payable on demand.  It cannot be


    paid to the bearer but the beneficiary has to
    present the instrument directly to the branch. It
    can also be collected by the clearing mechanism
    of the bank. Mostly, demand drafts are issued in
    situations where the parties are unknown to each
    other and lack trust. It comes handy in such
    situations as there are almost no chances of
    fraud and counterfeiting.

    History of Demand Draft in India


    Indian demand drafts are similar to cashier’s
    cheque in the United States but they have
    certain differences. Cashier’s cheques or orders
    were cleared locally whereas demand drafts
    were cleared at National Clearing House.
    Cashier’s orders involve a lower commission
    charged by the issuing bank and they are cleared
    on the next business day. On the contrary,
    Indian demand drafts that are cleared at
    National Clearing House take around 7 to 15
    days. However, both are guaranteed by the
    issuing bank. After the advent of electronic
    clearance system and digital banking, both
    process faster but the terminologies still live and
    so do the charges along associated with these
    instruments.

    How a Demand Draft Works?

    The draft facility is available for people


    regardless of them having a bank account or not.
    Anyone who wants to pay a certain amount to
    an institution or to someone with a proof of
    payment can issue a demand draft. Individuals
    can visit the bank and ask for a draft form or
    they can also fill the form online.

    The amount mentioned in the form can be paid


    either by cheque or cash

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    Types of Demand
    Drafts
    Demand drafts are of two types:

     Sight Demand Draft: This type of DD is


    approved and paid only after the verification
    of certain documents. The payee will not be
    able to receive any money if he/she fails to
    present any of the required documents.
     Time Demand Draft: A Time DD is
    payable only after a specific period of time
    and before that, it cannot be drawn from the
    bank.

    How to Make Demand Drafts?


    The form for demand drafts can be collected
    from the bank or can be filled online. You need
    to input some important details such as your
    mode of paying for the draft (cheque or cash),
    the name of the beneficiary, the place of
    encashing the draft, cheque number, your bank
    account number, signature, etc. You would also
    have to provide your PAN card details if you are
    paying more than Rs. 50,000 by cheque.

    You are required to pay certain charges for the


    draft which are subject to the bank’s policies.
    The charges may vary but there always remain a
    certain criterion. Here is a list of charges levied
    by the popular banks of the country.

    Demand Draft Issued by Cheque:

    Amount Charges

    Rs. 25 +
    Up to Rs. 5,000
    GST

    From Rs. 5,000 to Rs. 50 +


    Rs. 10,000 GST

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