Currently the use of negotiable instruments has reduced considerably, given the onset of digitization of monetary transactions. Now that everyone uses NEFT, RTGS or UPI for money transfer, instruments like Demand Drafts are almost extinct. But there are still some institutes or organizations that prefer taking a Demand Draft over the digitized form of payments.
What is a Demand Draft?
Demand Draft or DD for short is a Negotiable Instrument used by an individual or an institution to withdraw money from the bank.
- It is pre-paid in nature
- The drawee bank undertakes to pay the amount noted in the demand draft, to the drawer, as and when the instrument is presented to the drawee bank
- Demand Drafts are made offline and are firstly drawn by the person who has to make the payment upon his or her own bank
- Later on, this Demand Draft after being duly stamped and scrutinized by the bank is handed over to the drawer, who in turn will have to show it at the drawee bank branch to get the withdrawal
- Demand draft is payable only at a specific branch or a specified centre of the Bank and not anywhere else
- These specifications are normally written clearly in the demand draft
- People often use demand drafts where transactions with cheques are problematic or there are chances of it being bounced
- Since a DD cannot be drawn unless the person drawing it shows sufficient balance in their account, therefore, there is an assurance of getting the specified sum at the presentation of the Demand Draft
- Demand draft is valid only for a period of three months, post which the instrument becomes useless and if the person requires to make the payments again, they will have to draw a new DD