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Updated: 17-12-2019 09:18:11 AM

Demand Draft:

Demand draft is a negotiable instrument that contains an order of the bank directing other branch or bank to pay the payee (beneficiary) mentioned amount in the draft. A demand draft is a fund transfer instrument issued by the bank on the request of the drawer. It guarantees the payment of the specific amount and it cannot be transferred to another person.

Demand drafts are payable on demand and they offer a more secure way of receiving payments. This is because they are hard to counterfeit and the drawer has to pay the bank first to issue a demand draft. This is also a reason that most businessmen prefer demand drafts over cheques as cheque can bounce and the chances of fraud as also high with cheque.

In addition, a demand draft cannot be paid to the bearer but the receiver (payee) has to present the instrument to the bank. Banks often collect demand drafts through their clearing mechanisms. Demand drafts are a good way to receive payments when two parties do not know each other. A demand draft becomes useful in such situations as it assures the payment with considerably low chances of counterfeit.

What are the types of demand draft?

Demand drafts issued by different banks are more or less similar but these can be classified as per their nature of payment.

  • Sight demand Draft: Sight demand draft is payable when the payee presents certain documents to the bank. The bank verifies those documents and pays the amount to the payee. The payment is denied if the documents are not appropriate or correct. 
  • Time Demand Draft: This type of demand draft is payable at a certain time. The draft is not payable if the payee presents the draft to the bank before the specific time.
What is a DD Number?
How Demand Draft is Issued
How to Cancel a Demand Draft?
What is an Expired Demand Draft?
What is a DD Number?

A DD number or draft number is a serial number printed on the left bottom of the draft. The DD number is a serial number similar to a cheque number. Each bank has its unique series of DD numbers. DD numbers are usually not considered of much importance but they come in handy in the event of a lost or stolen draft. Sometimes drafts are lost in the forwarding process by the banks and here, DD number can be highly useful to check the entries quickly and find out whether the bank has issued a demand draft or not.

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DD number plays an important role in the case of a stolen draft. If the drawer has promptly reported about the lost draft to the police and bank authorities then any person who goes to encash it will be detained immediately. That is why it is important to keep a photocopy or snapshot of your demand draft so that at least you can use the DD number for tracking the draft in the event of a mishap.

How Demand Draft is Issued

Demand drafts are generally used of making payments such as schools/colleges fees, business payments, government institutions, etc. This is because it is a secure mode of money transfer that guarantees the payment at a specific place and time.

Individuals can issue a demand draft from the bank by filling a form given by the bank. They can also download the form from bank website and fill it. It requires certain important details for transferring the funds such as your mode of payment for the draft (cheque or cash), the name of the beneficiary, the place of encashing the draft, cheque number, your bank account number, signature, etc. However, demand draft forms cannot be submitted online. You have to go the bank to deposit the mentioned amount to issue a payable draft.

Banks also charge some fee for issuing a draft. Usually this fee is minimal but it increases along with the amount of the demand draft. These charges vary as per the bank’s internal transaction charges and your preferred payment medium such as cash or cheque. Having said that, you have to provide your PAN card details if you are issuing a draft worth Rs. 50,000 or more.

Here are the demand draft charges of a few popular banks in both mode of payments.

Demand Draft Issued By Cheque:

Bank

AmountCharges

SBI

Up to Rs. 5,000Rs. 25 + GST
From Rs. 5,000 to Rs, 10,000Rs. 50 + GST
From Rs. 10,000 to Rs. 1 lakh

Rs. 5 per part of Rs. 1,000 which is Min. of Rs. 55 and Max. of Rs. 15,000

ICICI

Up to Rs. 10,000Rs. 50 + GST
More than Rs. 10,000

Rs. 3 per part of Rs. 1,000 which is Min. of Rs. 75 & Max. of Rs. 15,000

Demand Draft Issued By Cash:

Bank

AmountCharges

SBI

Up to Rs. 5000

No cash handling charges will be levied in addition to the regular charges for a cash transaction

From Rs. 5,000 to Rs, 10,000

From Rs. 10,000 to Rs. 1 lakh

ICICI

Up to Rs. 10,000

Rs. 4 per thousand rupees subject to a minimum of Rs. 100 & Max. of Rs. 15,000

More than Rs. 10,000

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How to Cancel a Demand Draft?

A demand draft form can be downloaded online but an issued demand draft cannot be cancelled online. The money you deposit for the instrument is accepted by the bank and you cannot ask for a refund just because you changed your mind. There is a standard procedure for that. The demand draft has different cancellation procedures according to their payment methods.

  • Cancelling the Draft Issued by Cash Payment: You have to present the original DD to the bank for cancellation. The bank will deduct around Rs. 100 to Rs. 150 and refund the rest of your money. 
  • Cancelling the Draft Issued by Cheque: You have to submit the original demand draft along with a duly filled cancellation form to the bank. The amount mentioned in the draft will be credited to your account with a deduction of Rs. 150. 

However, you might land in serious troubles where you have lost your demand draft or missed it in postal service. The situation will become worse if you do not have the DD number. Nonetheless, with some cooperation from the bank and your good behaviour, you can find the duplicate DD receipt and precede the cancellation.

What is an Expired Demand Draft?

A demand draft is valid only for a period of 3 months. The period starts from the date of issue and it expires after that period if not presented to the bank. Despite being expired, the amount mentioned in the draft is not refunded to the drawer. The drawer can only refund the money after revalidating the draft. And the payee cannot approach the bank in any possible case for revalidation of the demand draft.

Banks usually verify the details before revalidating the draft and charge some fee for the work. In addition, a revalidated demand draft cannot be revalidated again as it is a one-time procedure.

Despite being a safe and trusted medium of funds transfer over the years, demand draft fraud is on the increase these days. This is possibly due to the easy availability of latest technology and equipment for making counterfeit instruments seem perfectly genuine. In such situations, it is better to take some precautions. These precautions include keeping proper information of the drawer, keeping a snapshot of the draft, keeping the receipt, and taking immediate legal action if required.

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