What Is a Demand Draft?
A demand draft is a way to transfer money from one bank account to another. A demand draft does not need signatures and it can be used for fraud. The Federal Reserve proposed new regulations in 2005 because more and more people were using the demand drafts for fraud.
When someone wants a demand draft, the bank takes money from their account and puts it in another account. The person who requests the demand draft is called the drawer, the bank that pays out is called the drawee, and the person that gets paid is called the payee.
Demand drafts are for people who need to withdraw money from other people’s accounts by using their account numbers and bank routing numbers.
How does Demand Draft work?
The draft facility is for everyone. It does not matter if they have a bank account or not. Anyone can pay the amount to an institution or person who has proof of payment, and then they get a form. You can get the draft at the bank, or fill out the form online.
Types Of Demand Draft
There are two types of Demand Draft-
Sight Demand Draft – This type of Demand Draft is approved when the person has provided all the necessary documents. The person won’t get any money until they have done that.
Time Demand Draft – A time deposit is an account that you have to put money in, but it can’t be used for a while.
How To cancel a demand draft?
To issue a draft, you need to give the bank some money. This money is often cash or cheque. But if you want to cancel this draft, you need to go back to the bank.
There are no online provisions for it. You may have two cases where you will need to cancel your DD when it is accepted with cash or cheque and when it is accepted with a card payment.
You Paid Through Cash – To get a refund from the bank, you need to give them the original draft and the receipt. The bank will take away around Rs. 100-150 for this service.
You Paid Through Cheque – If you paid by check and it was withdrawn from your account, provide the original draught along with a completed cancellation form. After that, wait for about a week and your money will be back in your account without any deductions.
What To Do If Demand Draft Will Expired?
A draft is valid for a period of 3 months from the date of issue. If you don’t use it after that time, the bank will not give you your money back. You can ask the bank to revalidate your draft if it has expired, but only if it’s still in good condition.
The bank looks at the draft of money that you have before they revalidate it. They extend it by 3 months, but then people cannot do that anymore.
Advantages of Demand Draft
Advantages of the Demand Draft:
- You can get your money back if you want to cancel within 24 hours.
- You don’t even have to go to the bank to acquire it.
- With a cheque, the person who has the money in their account might not have a lot in their account. So they can’t give you all of it. But when you take a DD, they must put enough money in there for you to get all of it from them.
- There is no limit to how much money you can give DD Bank and they do not need the payee’s banking information.
- DD provides the service of a large population in India who do not have access to the internet.
- Demand Draft is a safe way to pay. If someone uses your internet banking, you can’t be sure that they won’t take all of your money.
- A good internet connection is needed for RTGS/ NEFT transactions. But not for DD. This instrument can be very useful if you live in a remote area.
What is the Validity Period of a Demand Draft?
In the past, a Demand Draft was valid for six months. But as of April 1, 2012, the validity period of a Demand Draft is only three months. The idea behind this change is to make sure that people do not use these types of instruments as if they were cash. People will think first before using a DD or similar instrument because it will not be valid for long.
Demand Drafts VS Cheques
A demand draft is a payment that comes from the bank. It is different from checks. Checks are drawn by customers of the bank, but demand drafts are drawn by employees of the bank. You can stop payment on checks but not on-demand drafts.
A demand draft is a way to transfer money from one bank account to another. They can be written even if someone does not have a bank account. A check on the other hand, cannot be written unless the person has a bank account.
Example Of Demand Draft
If a small business owner purchases goods on credit, he instructs his bank to send a demand draught to the supplier. The bank is the drawee of the draught. After the draught matures, the other company’s owner takes it to his bank for payment.
Conclusions Of Demand Draft
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