Demand Draft

Living in a world where transactions have become an important part of our everyday routine, be it booking a ticket or paying the electricity bill, it has been integral to several facets of our lives.

These transactions are often performed through several mediums such as- net banking, cheque, demand draft, etc. Cheque and Demand Draft are the two often confused terms amongst many, and thus this article will delve further into the usage of a Demand Draft and differentiate the two.

What is a Demand Draft?

The bank issues a Demand Draft or a DD to its client or the “drawer” that directs either the branch of the same bank or another branch of a different bank to pay the desired amount to the party.

While a cheque is issued and cleared by the bank in one or two days, the number of days taken by the Demand Draft to get cleared varies from one bank to the other. However, the same is usually done within two business days. Where the payments through cheques remain uncertain and dependent upon the money in your bank account, the DD serves as a more secure and reliant mode of transaction.

Types of Demand Draft

Segregated and divided, two kinds of demand drafts have been established-

  • Sight Demand Draft: In this type of DD, the transaction is only made possible once all the documents are verified and approved by the concerned authorities. As per the guidelines, the payee will not be able to receive the desired payment if he/she fails to provide the necessary documentation.
  • Time Demand Draft: Payable after a certain period, the DD cannot be withdrawn before the specified time.

How to get A Demand Draft?

As the drafts are payable on demand, anybody can make use of DD irrespective of whether they are an account holder or not. In many cases, the Demand Drafts are used to ensure reliable and transparent transactions between two unknown parties. 

To get a Demand Draft, follow the procedure:

  • Visit the nearest bank.
  • Request for a Demand Draft form and fill in the following details
    • Name of the branch
    • Applicant’s name
    • In favor of
    • Amount
    • Commission
    • Date
    • Name, address, and signature
  • After duly filling the application form, submit it at the desk.
  • The applicant will be required to pay the amount to receive the DD.
  • After receiving the DD, submit it to the respective organization.

Please note that certain charges are also applicable while making a Demand Draft, which mainly varies depending upon the bank. 

The Demand Draft issued will then be valid for three months and must be cashed or claimed within that period only. After three months, the Demand Draft will expire, and the money will not be refunded until the drawer approaches the bank to renew or revalidate the draft.

Can the Demand Draft be canceled?

Yes, in certain cases, when the drawer has the DD issued as an instrument of proof. If the payment has been made through cash, the DD will be canceled, and the amount will be refunded on the submission of the original DD and the receipt issued by the bank. The bank may, however, choose to deduct a small amount, usually Rs. 100 to 150, from the sum.

In case of payment made through cheque, the process might be a little tenuous where the drawer will be required to present the original Demand Draft along with a duly filled cancellation form. After due verification by the concerned authorities, the amount will be refunded to the bank account of the person with a small deduction.

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About the Author

Piyush values education and has studied from the top institutes of IIT Roorkee, IIM Bangalore, KTH Sweden and Tsinghua University in China. Post completing his MBA, he has worked with the world’s # 1 consulting firm, The Boston Consulting Group and focused on building sales and marketing verticals for top MNCs and Indian business houses.

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