Demand Draft Form

Demand Draft also called DD is a way to initiate transactions from one bank to another. It is a negotiable instrument that guarantees payment of a specific amount of money to the specified payee.

Demand draft is only issued by the bank and one cannot issue a DD on an individual level. It is majorly issued in cases where parties are unknown to each other. The bank (drawee) issues demand draft to a client (drawer) to pay the specified amount of money to the specified person (payee).

Demand Draft Details

The important fields on a Demand Draft (DD) and the values they contain have been discussed here:

Until net banking, mobile banking, credit cards, etc. had become popular, people used to make loan and other payments by DD. The risks associated with a demand draft are minimal as compared to a cheque which is the reason why DDs have always been preferred by many people over cheques for payment. However, there are still few risks involved with demand drafts, such as:

• A Demand Draft may be forged or stolen
• The banks issuing the DD may go out of business before the DD is deposited and cleared
• The drawee may not deposit the DD on time and it may become invalid
• The drawer may have made a mistake while getting the DD

Demand Draft (DD) Form

It is important to fill in DD form with all necessary details. Here are few fields that you need to fill to get a DD issued by a bank:

• Name and Address of the drawer (your name)
• Name of the drawee
• Name and address of the payee
• Name of the city where DD is payable
• Amount payable to the drawee (in words)
• Amount payable to the drawee (in figures)
• Exchange (fee charged by the bank)
• Total amount payable by the drawer to the bank (in figures)
• Signature of the drawer
• Name and Address of the drawer

In many DD forms, drawer is referred as the “applicant”.

How to Issue a Demand Draft

Step 1: Fill the DD form with all details mentioned above

Step 2: Make the payment either through cash or from your bank account.

Step 3: The bank verifies all details mentioned in the DD form

Step 4: After successful verification and receipt of money, the bank issues the demand draft to the applicant

Step 5: The applicant has to submit this DD to the payee and complete the transaction

Important Points to Note for a DD

• If you are going to pay for the DD in cash, submit the DD form and pay cash to get the DD.
• If you are going to pay from your bank account, you will need to furnish those details as well before you can get the DD. The bank will immediately deduct the money and issue you the DD.
• For amounts exceeding Rs. 50,000 or more, you will have to give your PAN details to the bank.
• For smaller amounts, you only need to present your ID and address proof to the bank.
• It is advisable to check the details on your DD including the drawee’s details, etc. before you leave the bank.
• Before you handover the DD to the payee, make sure to keep a copy (photocopy or photo) of the DD. This will help you if there are any problems with the DD.

Features of a Demand Draft

• DD is payable on demand
• There is no stamp on a DD
• Can be negotiated by endorsement and delivery
• Not payable to bearer
• It cannot be stopped except by court order
• Amount is refunded if DD is not delivered
• The purchaser of the DD need not be a customer of the bank

Advantages of a Demand Draft

• Unlike a personal cheque, demand draft is guaranteed by the bank. It means that the payee gets the guarantee for funds.
• Demand Draft is a more convenient method for transferring huge amounts. Unlike e-transfer, it doesn’t require the information of the payee and doesn’t have capping on fund transfer. Hence, demand drafts are commonly used whilst making huge purchases, such as payment of fees, medical bills, buying a car or a house, etc.
• A demand draft can be used for cross-border purchases and investments

Disadvantages of a Demand Draft

• A Demand Draft represents a transaction that has already taken place. Hence, it cannot be cancelled once it is delivered to the payee.
• If the demand draft gets lost, stolen, or altered with and the funds are cashed out by the wrong person, the bank is not responsible for replacing the lost money.
• Demand draft is valid only for 3 months and if not encashed in this time frame, the payee is at a loss of funds.

FAQs

Q. How to cancel a demand draft?
Ans. Since you did not issue the DD directly, you cannot cancel a DD on your own. You need to visit the issuer bank and follow the procedure to cancel a DD if it has not been cleared. If you paid by cash, you need to submit the original DD, receipt of cash payment, and DD cancellation form to request cancellation of DD. You will receive a refund after the deduction of the cancellation charges levied by the bank.

If you made the payment using your bank account, you can submit the original DD and the cancellation form. The amount will be refunded to your bank account after deducting the cancellation charges.

Q. What will happen if I lose my demand draft?
Ans. If you lose your DD, you need to sign an Indemnity Bond in stamp paper for the issuing bank. A copy can be helpful to present when you visit the bank. The bank will take some time to process the payment. Some banks clear payments for lost demand drafts in one week while others wait until the expiry date of the DD. In any case, they will deduct charges before issuing you a refund.

Q. How to encash a demand draft?
Ans. It is not possible to encash a DD anymore. Banks have stopped paying a drawee in cash to avoid fraudulent transactions. If you are the payee, when your bank receives a DD, they will make the payment to your bank account only. If you have a bank account in the same bank that issues the DD, the payment will be cleared in one business day. In the case the banks are different, it can take up to three business days.

Q. What to do if the DD expires before I encash it?
Ans. Demand drafts have a validity period of 3 months from the date of issue (printed on DD). If it is not presented within its validity period, the DD becomes invalid. However, the amount is not refunded to the drawer automatically even if he made a payment from his bank account. Only the drawer can submit the application to the issuing bank for the revalidation of the DD. The issuing bank will verify the records and details before revalidating the DD for another 3 months. If the revalidated DD is not presented, it cannot be revalidated again.

Q. Is a fee charged from payee at the time of encashment?
Ans. No, no fee is charged from the payee at the time of encashment by the bank.

If you lose your DD, you need to sign an Indemnity Bond in stamp paper for the issuing bank. A copy can be helpful to present when you visit the bank. The bank will take some time to process the payment. Some banks clear payments for lost demand drafts in one week while others wait until the expiry date of the DD. In any case, they will deduct charges before issuing you a refund.

Q. How to encash a demand draft?
Ans. It is not possible to encash a DD anymore. Banks have stopped paying a drawee in cash to avoid fraudulent transactions. If you are the payee, when your bank receives a DD, they will make the payment to your bank account only. If you have a bank account in the same bank that issues the DD, the payment will be cleared in one business day. In the case the banks are different, it can take up to three business days.

Q. What to do if the DD expires before I encash it?
Ans. Demand drafts have a validity period of 3 months from the date of issue (printed on DD). If it is not presented within its validity period, the DD becomes invalid. However, the amount is not refunded to the drawer automatically even if he made a payment from his bank account. Only the drawer can submit the application to the issuing bank for the revalidation of the DD. The issuing bank will verify the records and details before revalidating the DD for another 3 months. If the revalidated DD is not presented, it cannot be revalidated again.

Q. Is a fee charged from payee at the time of encashment?
Ans. No, no fee is charged from the payee at the time of encashment by the bank.