Application and Preparation of Demand Drafts

The first step includes visiting the bank and asking for a demand draft form or you can fill one through online services.

Next, you need to fill in all the necessary details such as

• Payment mode: Cheque or cash,
• Make the demand draft under whose name,
• The total amount,
• Cheque number,
• Your bank account number,
• Encashment details and
• Your signature.

You will get your demand draft once you submit the required application form along with the services charges. Every bank has its own charge structure. You need to find out the charge of the bank from which you are availing the demand draft service. You can make your demand draft either at your own bank or at any other bank.

You need to give your PAN card details if the sum total is more than Rs. 50,000

If you making a demand draft online then all you need to do is fill in all the details and then collect the demand draft at the respective branch mentioned by the bank. You will get your demand draft after 2-5 days by courier.

Features of a Demand Draft

• It can only be paid on demand.
• Under the act of the Negotiable Instruments Act, 1881, in section 85, complete information has been laid out about demand drafts.
• It shouldn’t be paid to the bearer
• There is a specific amount of charge attached to the demand draft. RBI decides services charges for demand drafts but each and every bank is free to have their own service charges.

Preparation of Demand Drafts

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 scrutinise 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.

How to Get a Demand Draft Issued

• Visit the bank where you have your account.
• Draw cash in the name of “self”
• Ask the bank teller to give you the form needed to be filled for making the demand draft
• Fill in the details and submit the form along with the cheque.
• The teller will scrutinize all the details and once he is satisfied, he will ask you to pay a small charge for making the DD
• He will then stamp the DD and hand it over to you.

Crossed Demand Draft

In case the Demand Draft is Crossed as Account Payee, it cannot be encashed over the counter from the Bank Branch and can only be cleared by depositing in the Bank Account of the Person in whose favor the DD has been made. However, in case the Instrument is not a Crossed Demand Draft, it can be encashed without depositing in the Bank Account, by encashing it over the counter from the Bank Branch.

The main purpose of Crossing a Demand Draft is the ensure that the payment is cleared by means of an account i.e. the payment is deposited in the Bank Account of the person in whose favour the DD has been drawn. This helps in preventing wrongful payment to any person and ensures that the payment is made only to the person in whose favour the DD has been drawn and not to any person.

If the DD is not crossed, the payment would be made by the bank to the holder of the Instrument after his proper identification. And in case, it is a crossed demand draft, the payment would be made only to the Bank Account of the person.

Difference between Demand Draft and Cheque

A Cheque is signed by an Individual and therefore there are chances that the cheque may or may not clear. However, a DD is prepared by the Banker and as it is signed by a banker, the chances of default are not there.

You would have seen that many organisations when receiving payments from the public don’t accept Cheque Payments and require that payments should be made through Bank Drafts. The reason for this is that there are chances that the Cheque may get dishonoured or may not clear due to any reason whatsoever, but that is not the case with DD. In case of a DD, the Payment is to be made by the Bank who has drawn the Demand Draft and therefore the chances of the cheque not clearing are Nil.