4,80,000 people visited this section in last 30 days. Apply Online

Get Cashback of Upto ₹ 1,000* on Loans Apply Online

MyLoanCare Customer Ratings - 4.5/5.0 Apply Online

Demand Draft

What is Demand Draft Meaning

Last Updated 16th Jun 2021

  • A DD is a cash instrument used by an individual to make a transfer payment from one bank account to another.
  • Draft is the facility available to the individual irrespective of the person having an account in the bank.
  • DD bank is convenient as it does not have a maximum amount limit and does not require the payee's banking information.
  • Demand Draft is secure and the transfer of the required amount under the DD is guaranteed.
  • DD is valid for three months from the date of the issue.
Apply for Savings Account

What is Demand Draft?

A demand draft is a negotiable instrument to transfer funds from one bank to another. Negotiable instrument here means that it guarantees a certain amount of payment mentioning the name of the payee.

Payee is the person or party receiving the money, the drawer is the person requesting the demand draft; the bank paying the money is the drawee. Bank issues Demand Draft to a client (drawer) to direct a bank (drawee) to pay the specified amount of money to the specified person (payee). DD are issued mostly in situations where the parties are unknown to each other and lack trust.

Different Types of Demand Drafts

On the basis of time period of withdrawal, demand drafts are of two types:

  • Sight Demand Draft: Sight Demand Draft is the DD which is payable immediately. This type of DD is approved and paid only after verification of certain documents.
  • Time Demand Draft: Time Demand Draft is a particular type of DD which can only be withdrawn after a stipulated time.

How Bank DD Works?

Demand Draft is the facility available to the individual irrespective of the person having an account in the bank. Any individual who wants to pay a certain amount to an individual or institution can use this facility. Individuals are required to visit the bank and ask for a DD or fill the form online. The amount mentioned in the form can be paid either by cash or cheque.

Advantages of Demand Draft

Advantages of the Demand Draft are as follows:

  • Unlike in the case of cheque, the transfer of the required amount under the DD is guaranteed.
  • DD bank is convenient as it does not have a maximum amount limit and does not require the payee's banking information.
  • DD serves the purpose of a significant population of India that is dependent on offline instruments.
  • Demand Draft is secure, and unlike in the case of internet banking, there is no chance of hacking.
  • Online transactions like RTGS/ NEFT require good internet. However, there is no such need in case of DD, and this instrument can be very useful in remote locations.

What is the Validity Period of a Demand Draft

Earlier, the validity period of the Demand Draft was six months. However, as per RBI guidelines from April 1, 2012, negotiable instruments like Demand draft, Cheques, banker's cheque, pay orders etc. will be valid for only three months. The rationale behind the move was that people need to be curbed to make these instruments an alternative for cash because people took undue advantage of the six months' validity, and the DD and other instruments were circulated in the market like the cash.

What are the Risks involved with Demand Draft

The two significant risks involved with the Demand Draft are:

  • DD may get stolen, forged, or altered with.
  • In case the funds are cashed out by the wrong person, the financial institute is not responsible for replacing the lost money.
  • The Demand Draft may become invalid after the prescribed time.
  • DD represents a transaction that has already taken place and cannot be cancelled once it is delivered to the payee.

Major Difference between DD and Cheque

The major differences between DD and Cheque are as follow:

ParametersDemand DraftCheque
Meaning This a negotiable instrument for transferring money to a specific person and at a specific place. It can be issued for the local region or for another city.A cheque is a written document which contains an order to the bank, to pay a certain sum of money to a specified person.
Order of paymentBy the branch of a bank to another branch of the same bank.By the account holder to the bank.
Bank Charges for issuanceCharges are levied No charges are levied
DrawerBankCustomer itself
Payable Always payable on demand to a specified party.Payable either to order or to bearer.
Dishonour No Yes

What to do if Demand Draft is Expired?

Demand Draft is valid for three months from the date of the issue. The DD will expire if not presented to the bank within those three months. The DD amount will not be refunded in the Drawer's account. He will be required to approach the bank to revalidate the Draft. The bank will verify all the details mentioned and revalidate the Draft for another three months.

Only the Drawer can ask the bank for the revalidating the Draft. The payee or any other person's request for revalidation is not considered.

How to Cancel a Demand Draft?

The amount you give to the bank whether in the form of cash or in the form of the cheque is accepted for Demand draft immediately after you provide the same to the bank. You must go to the bank to cancel the cheque; there is no online medium of cancelling the Demand Draft. You may have to write an application to the bank for cancelling the DD citing the reasons for the cancellation. The offline ways to cancel the Demand Draft are as follow:

  • Demand Draft issued upon paying cash: If you paid the amount to the bank in the form of cash, you must submit the original Draft along with the receipt of the same to get the refund. Bank will deduct the cancellation charges.
  • Demand Draft issued Upon Amount Deducted from your Account: If Demand Draft was issued by deducting the amount from your account using cheque then to cancel the same, you would be required to submit an application and original DD to the bank. The amount will be credited into your account after the bank deducts the cancellation charge.

FAQs

How do I check my DD clearance status?

You can either visit the nearest bank branch or check it via the respective bank's net banking portal.

What if DD is lost?

In case you lost your DD, you will be required to sign an Indemnity Bond in stamp paper for the issuing bank. A copy can be helpful to present when you visit the bank. The bank will deduct charges before issuing you a refund.

How to deposit a demand draft in the bank?

You can walk into the bank branch and make a demand draft by filling up an application form. You will have to pay charges to make a DD based on the amount of transaction.

What is an online demand draft?

Demand Draft can also be created online, such DDs are known as online demand drafts. The online DD details need to be accurately filled online, and the physical demand draft can either be collected from the branch of the issuing bank or can also be mailed to the registered address.


Notification ×
  • Home Loan

    Home Loan at all-time low rates starting at 6.65%. Cashback of up to ₹ 1,000.

    Apply Now
  • Personal Loan

    Instant Personal Loan starting at 10.25% with Cashback of up to ₹ 1,000 .

    Check Offers
  • Gold Loan

    Instant Gold Loan starting at 9.50% with Cashback of up to ₹ 500

    Apply Now
  • Loan Against Property

    Best Loan Against Property Offers starting @ 7.20%. Cashback of up to ₹ 1,000*.

    Apply Now
  • Business Loan

    Collateral Free Business Loan Rates starting at 14.00% with Overdraft facility.

    Apply Now
  • Fixed Deposit

    AAA rated FDs with returns as high as 6.95%.

    Invest Now
*Terms and conditions apply. Credit at sole discretion of lender, which is subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and collected from public sources. Read More
Loader
Please wait while your information is being processed...