Demand Draft: Introduction
A Demand Draft, popularly known as DD, is a negotiable financial instrument pre-paid by the drawer to a bank or other financial institutions that, in turn, pays to the drawee. The drawer makes payment to get a DD through his bank account if he has an account with the bank or by cash. Then, the bank issues a DD that is presented to the receiving bank that processes it. A Demand Draft is valid for 3 months.
Since the bank will pay the payee, a Demand Draft is safer as compared to a cheque. Another reason why DD is still popular is that it can only be paid to the drawee. A bearer cannot obtain the payment.
The important fields on a Demand Draft (DD) and the values they contain have been discussed here:
Field in the DD | Field Details |
Bank branch | The branch of bank issuing the DD |
To Pay | Details of the Drawee |
Date | Date of issue of DD (Validity Period is 3 months from this date) |
Amount (in words) | The amount payable to the drawee in words |
Amount (in figures) | The amount payable to the drawee in figures |
Branch | The bank branch that pays the amount to the drawee |
DD number | A Unique Number Assigned to the DD |
Signature | Signatures of the officers of the bank branch issuing DD |
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 a few risks involved with Demand Drafts, such as:
- A Demand Draft may be forged or stolen
- The bank 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