Banks use many ways negotiable instruments or bills of exchange to receive and transfer money. Among such instruments are cheques, demand drafts and various other sub-categories of the same. Although today not much of these instruments are in circulation due to the digitized ways of instant money transfer, some college applications or government applications require you to submit demand drafts for payment of fees.
What is a Demand Draft
Demand draft is very much like a bill of exchange. It is issued by a bank to the drawer, who is bank’s client, directing the bank, either another branch of the same bank or a different bank altogether, to pay the sum mentioned in the demand draft, to the person who presents it at the counter.
Demand Draft Clearing Time
Demand Draft is unlike a cheque. While a cheque takes a specified time of a day or two to get cleared, the same cannot be said for the demand draft. There are no codified rules as to how long the banks have to take in clearing the DD, which is why the time taken by each bank varies. Ideally, it takes two business days for a demand draft to be cleared.
This time can be longer in case there are any issues with the instrument. As stated earlier, Demand Drafts are executed after several scrutinies and they are technically drawn by a bank on another bank. In situations where the amount has to be transferred from one bank to another, there is a possibility of it taking longer than two days.