Demand Draft

DD

One of the payment instruments used in India, demand draft is popularly known as DD. It is a pre-paid negotiable instrument where the drawee bank takes the responsibility of making the payment when the DD is presented by the payee.

In order to receive the payment, the DD needs to be provided to the concerned bank branch or have the instrument picked up through the clearing mechanism.

Validity of a Demand Draft

As per the guidelines laid down by RBI, the validity period of a demand draft is 3 months. It was reduced to 3 months from 6 months with effect from 1 April 2012.

Why are Demand Drafts popular?

Demand drafts are popular because they can only be paid to the drawee. In addition to this, the fact that the instrument can be prepared from any bank irrespective of having a bank account with them comes in handy.

While the instrument is prepared normally in Indian currency, the draft can be prepared in foreign currency as well. As there is no risk of non-clearance of a demand draft, it is a preferable option of sending payments abroad.

Modes of paying available for Demand Draft

There are two modes of paying for a demand draft. They are:

  • Cash
  • Cheque

Note: If the amount of the DD exceeds Rs.50,000, you can only pay for it through cheque.

Charges for Demand Draft

When it comes to the charges associated with making a DD, there is no standard fee. It varies from bank to bank and on the value of the demand draft.

  • Preparing the DD – Usually between Rs.1.50 to Rs.4 per thousand + service tax. If the amount is of a low value, then flat charges may apply.
  • Cancellation charges – Generally ranges between Rs.100 and Rs.300.

Privileged/preferred customers of the bank may get preferential charges.

Risks involved with Demand Draft

  • The instrument may get stolen or forged
  • The DD may become invalid

Frequently asked questions (FAQ's) about Demand Draft

  1. Can a Demand Draft be paid to the bearer?

    Ans: No, a demand draft cannot be paid to the bearer. It can be paid only to the beneficiary after he/she presents the draft to the bank authorities.

  2. How do I cancel a Demand Draft for which the payment was paid through cash?

    Ans: In order to cancel a demand draft for which you paid through cash you need to submit the original demand draft with the receipt to the bank personnel.

  3. If a Demand draft gets expired, will the money be refunded to the drawer’s account?

    Ans: No. Upon expiry of a demand draft, the money will not be refunded automatically. You will have to visit the bank, revalidate the financial instrument, and then cancel it.

  4. What is Demand Draft fraud?

    Ans: It is a scenario when someone issues a fake draft in the name of a payee.

  5. Are Demand Drafts the same as cheques?

    Ans: No, demand drafts and cheques are not the same.

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Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products.

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