What is Demand Draft? Meaning, Types, Benefits and Uses

A demand draft is a prepaid payment instrument issued by banks. Since the amount is paid to the bank before the draft is issued, it assures both the payer and payee that the agreed-upon funds will be transferred.

Today, digital transactions dominate the world. But despite that, some financial instruments continue to serve as means of transferring funds. The demand draft is one of them for many individuals and businesses.

This article will discuss what a demand draft is, its features, and how to obtain one.

What is DD (Demand Draft)?

A demand draft, also called a bank draft, is issued by a bank on behalf of a customer. You give the bank the money you want to pay plus applicable charges.

The person or business you're paying can then deposit or cash the demand draft (depending on the crossing amount, bank procedures, and the instrument’s terms) to get the money.

Types of Demand Draft (DD)

In India, there are two primary types of Bank Drafts:

1. Sight Demand Draft

This demand draft is typically paid to the payee immediately upon presentation. However, in some cases, the payment may be subject to verification of certain documents. The bank will not release the payment if the payee fails to provide the required documents.

2. Time Demand Draft

This demand draft is paid by the bank only after a grace period has passed. Additionally, it has an expiry date, after which the bank will not honour the payment.

Uses of Demand Drafts

A demand draft can be used for the following purposes:

• Educational institution fees
• Government or regulatory payments
• Property-related payments
• Tender and application fees
• Payments where the recipient requires a prepaid bank-issued instrument

What Details are Required for Demand Drafts?

A Demand Draft requires specific details to ensure accurate and successful transactions. Here is a table summarising the essential information needed when requesting a Demand Draft:

How to Make a Demand Draft Online & Offline?

There are two ways to make a demand draft - Offline and Online. Here are the steps you can take for each mode:

How to Make DD in a Bank?

To make a Demand Draftfrom a bank branch, follow these steps:

Step 1: Visit Bank Branch

Go to the specific bank branch offering demand-draft services.

Step 2: Request Application Form

Ask the bank staff for a demand draft application form.

Step 3: Complete Form

Fill in accurate details in the application form.

Step 4: Review and Sign

Carefully review the filled-in form and sign it.

Step 5: Submit the Form

Hand in the completed application form to the designated counter.

Step 6: Make Payment

Choose your payment method (cash, cheque, or account debit ) to cover the DD amount.

A demand draft of ₹50,000 or more can’t be purchased against cash and must be paid for through a permitted banking instrument.

Also Read About:

How to MakeDD Online?

To make a Demand Draftonline using Internet banking, follow these steps:

Step 1: Access Your Bank's Official Website

Log in to your bank's official website and access your Internet banking account.

Step 2: Navigate to "Request and Enquiries"

Find your online banking account's "Request and Enquiries" section.

Step 3: Select "Issue Demand Draft"

Click the "Issue Demand Draft" option.

Step 4: Choose the Bank Account

Select the bank account from which you want the DD amount deducted.

Step 5: Provide DD Details

Enter the DD amount, payee's details, and purpose (if required).

Step 6: Specify the BranchEnter the 5-digit branch code of the bank from which you want to obtain the DD. You can find it using the branch locator tool.

 

Step 7: Select DD/Banker Cheque Payable Location

Choose the branch where the DD should be payable.

Step 8: Choose Delivery Method

Decide on the delivery method - either collecting it in person or requesting courier delivery.

Step 9: Submit Your Request

Confirm your choices and click "Submit."

Read also: How to fill a cheque.

Download the Kotak Bank Demand Draft Form

Download your Kotak Mahindra Bank Demand Draft form directly from our website and proceed with your transactions. Click below to download now.

Click on PDF to Download Demand Draft Format

https://www.kotak.bank.in/content/dam/Kotak/Customer-Service/Download-Forms/Personal-Banking/Remittance/demand-draft-fund-transfer.zip

What are the Charges for Demand Draft?

Demand Draft charges can vary among banks as there are no fixed authorities' rates. The charges are:

1. Draft Preparation Charges

Typically, these charges range from ₹5 to ₹25 per ₹1,000 plus GST. For smaller amounts, flat charges may apply.

2. Cancellation Charges

If you need to cancel a DD, the charges usually range from ₹100 to ₹300.

Things to Consider While Issuing a Demand Draft

When issuing a Demand Draft (DD), you must consider some things. Some of these things are:

1. Payment Method

If you plan to pay in cash, complete the DD form and provide the required amount to obtain the DD.

2. PAN Details

If the DD amount exceeds ₹50,000, you must furnish your PAN details to the bank as per regulatory requirements.

3. Bank Account Payment

When using your bank account, provide the necessary account details to the bank. The bank will deduct the funds and issue the DD promptly.

4. Verification of DD Details

Before leaving the bank, carefully review all the details on the DD, including the payee's information, to ensure accuracy.

What are the Advantages of Demand Draft (DD)?

A Demand Draft offers several advantages. Some of them are:

• DDs are secure as they cannot be counterfeited.
• DDs are prepaid; they cannot be bounced or dishonoured due to insufficient funds in the payer’s account.
• DDs are accepted by many institutions.
• The payee does not need a bank account to encash a DD below ₹20,000.
• The amount of a DD is fixed, meaning that it cannot be altered or tampered with, ensuring the payee receives the correct amount.

Read also: How to Recover Money Transferred to a Wrong Account 

Difference Between a Cheque and a Demand Draft

A cheque and a demand draft are both financial instruments for making payments. However, they differ in various terms. Here is a table of differences: