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What is a Bank Draft? Research Team | Posted On Sunday, February 22,2009, 02:58 PM

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What is a Bank Draft?



A bank draft is an order drawn by an office of a bank upon another office of the same bank by instructing the other office to pay a specified sum to a specified person or his order. Drafts can be issued against cash or by debiting a client’s account.

Features of draft

  • A draft is issued by a bank on one of its branches
  • A draft cannot be payable to the bearer
  • The relationship between the purchaser of the draft and the banker will be that of creditor and debtor
  • The purchaser of a draft can have it cancelled before it has been delivered to the payee by returning the draft
  • The purchaser cannot cancel the draft after it has been delivered to the payee
  • A bank cannot refuse to pay the amount unless there is some doubt on the identity of the person presenting it.

Liability of collecting banker

The collecting banker is liable for the following :

  • For the genuineness of endorsements
  • For opening account without introduction
  • If he does not present cheques within a reasonable time

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