A demand draft popularly called a DD is a negotiable instrument issued by a bank. What is a negotiable instrument? A negotiable instrument guarantees payment and gives the name of the payee. A negotiable instrument cannot be transferred to any other person. The DD is issued by the bank to the drawer (One who has to make the payment), directing another bank or the own bank branch to pay a specific amount of money to the payee. (Person who has to be paid the amount).
Demand Drafts are much safer than cheques. A cheque can be issued even if there are insufficient funds in your bank account. In the case of a DD, the drawer (one who makes the payment), has to pay before the bank issues the DD. So a DD cannot bounce.
Want to know more on Investment planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.
How does a DD work? You don’t need to have a bank account to avail the draft facility. You just fill the DD draft Form, pay money to the bank and get the DD issued. You can pay for the DD via cheque or cash.
DD are essentially of two types:
Banks may charge Rs 50 + GST for an amount of Rs 5,000-10,000 for DD’s issued by cheque.
Banks accept the money given, be it in cash or cheque, and you have to go to the bank if you want to cancel the DD, as there’s no online provision available.
You have made cash payment: Make sure to submit the original draft along with the bank receipt to get the refund. The bank has DD cancellation charges of around Rs 100-150.
You have made payments through cheque: You have paid through cheque for the DD. The bank has deducted charges from your bank account. You have to submit the original draft with a duly filled cancellation form. The amount is credited back to your account after a deduction of around Rs 150.
What if you have misplaced the DD or lost it in post? This could be a problem as the bank will ask for proof to show the DD was issued. The bank could co-operate and give you a copy of the draft receipt. This is a prelude to DD cancellation.
See also: Types Of Cheques
Bank Branch: This is the bank branch issuing the DD.
To Pay: Drawee Details
Date: Date of issue of the DD.
Amount/Words: This is the amount payable to the drawee in words.
Amount/Figures: The amount payable to the drawee in figures.
DD Number: This is a unique Number assigned to the DD.
Signature: Signature of the bank branch officer.
It should take about 30 minutes. Bank branches encash DD’s immediately, but if there’s a crowd at the bank, it could take some time. If a DD amount is more than Rs 20,000 it will not be paid in cash. The DD amount is credited directly to the bank account. This is done to avoid fraudulent transactions. This is for same banks. For other banks you have a maximum of 3 days.
DD Fraud through rare can happen. Digital information can be misused and with sophisticated equipment around, DD fraud can happen. DD fraud is when a fake DD is issued in the name of a payee. This makes it hard to track the person who issued the DD from the bank. The payee would have to suffer the consequences.
Keep information on the drawer: While this is not fool proof, it helps narrow down the search.
Keep a copy of the draft: Keep a colored photocopy in a safe place.
Engage legal action: Banks take legal action against payees in case of fake DD’s. Banks could file an FIR against you/payee. You must file a counter FIR and take legal help and advice.
You May Also Watch:
Keep your Financial Cognizance up to date with IndianMoney App. Download NOW for simple tips & solutions for your financial wellbeing.
Be Wise, Get Rich.
This is to inform that Suvision Holdings Pvt Ltd ("IndianMoney.com") do not charge any fees/security deposit/advances towards outsourcing any of its activities. All stake holders are cautioned against any such fraud.