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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:

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  • 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
Demand Draft (DD) Forms
Frequently Asked Questions:
Demand Draft (DD) Forms

It is important to fill in DD forms well with all the necessary details. Here are a few tips to help you fill the DD forms properly:

  • Name of the drawer (your name)
  • Name of the drawee
  • Name of the city where the DD is payable
  • Amount payable to the drawee (in words)
  • Amount payable to the drawee (in figures)
  • Exchange (Fees 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, the drawer is referred to as the “applicant”.

If you are going to pay for the DD in cash, you can now submit the DD form and pay cash to get the DD. However, 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. Otherwise, for smaller amounts, you only need to present your ID and address proof to the bank.

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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 drawee, make sure to keep a copy (photocopy or photo) of the DD. This will help you if there are any problems with the DD.

Frequently Asked Questions:

Q: How to cancel a Demand Draft?

A: 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 Demand Draft, 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 lost my DD?

A: If you lost your Demand Draft, you need to sign an Indemnity Bond in stamp paper for the issuing bank. A copy (photo or Xerox 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?

A: It is not possible to get encash a Demand Draft anymore. Banks have stopped paying a drawee in cash to avoid fraudulent transactions. If you are the drawee, when your bank received the Demand Draft, they will make the payment to your bank account only. If you have a bank account in the same bank that issued 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?

A: Demand drafts have a validity period of 3 months from the date of issue (printed on the 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 the payment from his bank account. Whether the drawer did not present the DD or the drawee, 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.

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