Demand Draft Guide: Meaning, Types, How to Make One

A Demand Draft (DD) is a secure, prepaid way to transfer money through a bank. Unlike cheques, DDs don’t rely on the account holder’s balance at the time of clearance. The bank sets aside the amount when issuing the draft, so there’s no risk of it bouncing.

Despite digital banking options, demand drafts are still used for high-value or inter-bank payments. They’re easy to request and don’t require you to have an account with the issuing bank. 

Keep reading to learn all about the Demand Draft Charges, their validity, types and more.

What is a Demand Draft (DD)? 

It is a money-transferring mechanism similar to a cheque. It offers security and a guarantee of successful money transfer as banks issue it only if the drawer has funds in their account. Check a brief overview of these banking instruments below:

• You can deposit money into any bank account using DD even if you do not have information regarding the recipient’s account number, IFSC code and other data.
• According to the RBI guidelines, demand draft validity only extends up to 3 months.
• You can revalidate the demand draft by writing a request to the issuing bank.

Types of Demand Draft

Here are the two main types of DDs and their distinguishing characteristics:

1. Sight Demand Draft

This is an immediately payable DD. The payee can receive the amount in their bank account by presenting certain documents, including proof of identity. It is generally used for international transactions, ensuring a prompt transfer.

2. Time Demand Draft

This type of demand draft is not immediately payable. The receiver can only transmit the DD amount to their bank account after the exact time, as noted on the DD.

Features of a Demand Draft

Here are some key features of demand drafts: 

• Secure and prepaid: A DD is issued only after the bank receives the full amount. This makes it a more secure form of payment. 
• No signature needed: Unlike cheques, demand drafts don’t require the account holder’s signature. This makes them less prone to fraud.
• Tamper-proof and fixed amount: The amount on a DD is fixed at the time of issue and cannot be changed. This ensures the payee receives the exact amount stated.
• Widely accepted and account-free: Demand drafts are accepted across India by institutions, colleges and businesses. You don’t need to have an account with the issuing bank.
• Safe for large transactions: There’s no set limit on how much money can be sent using a DD. It’s a suitable option for high-value payments.
• Refundable if unused: If the DD isn’t delivered on time, the bank refunds the amount to the person who initiated it. 

How to Make a Demand Draft in Online & Offline Method ?

You can get a demand draft either by visiting the bank or through internet banking. Here’s how both options work:

Offline Method

Step 1: Visit the nearest branch of your bank.
Step 2: Ask the bank staff for a demand draft application form.
Step 3: Fill out the form with details like amount, currency, payee name and reason for payment.
Step 4: Submit the form at the counter.
Step 5: Pay using cash, cheque or directly from your account. If the amount is above ₹50,000, provide your PAN.
Step 7: Keep a photocopy of the DD for your records.

Online Method

Step 1: Log in to your bank’s internet banking account.
Step 2: Go to the ‘Requests or Enquiries’ section and select ‘Issue Demand Draft.’
Step 3: Choose the account you wish to pay from.
Step 4: Enter the amount, payee name and payment reason. Also, add the branch code and select the branch where the DD should be payable.
Step 5: Pick how you want the DD delivered, courier or branch pickup.
Step 6: Review all details and click ‘Submit’ to complete your request.

Both these methods are simple. You can choose the one that works best for you, depending on convenience and urgency.

How Does a Demand Draft Work?

Demand drafts stand out as monetary tools provided by the banks. They work when the drawer visits the bank and requests a DD. The bank then delivers the payee’s details and the amount. 

The charge is then debited from the account, or the drawer produces the amount in cash. The drawer also has to pay extra fees if required. The bank will then administer the DD, which is given to the payee. 

The useful thing about DDs is that they cannot bounce because of inadequate funds. They also don’t require any signature and stay useful for 3 months to 6 months.

Apply for an Instant Cash Loan

Demand Draft Charges

When you make a demand draft, you must pay specific Demand Draft Charges to process your request. 

Here are the general charges that apply:

Charge Types	Amount
Charges for DD preparation	₹1.50 – ₹4 per ₹1,000 + GST
Charges for cancellation of DD	₹100 – ₹300 + GST

Disclaimer: These charges are subject to vary depending on the bank.

Things to Consider When Issuing a Demand Draft

Take into account the following points when issuing a DD:

• Select the payment method before completing the DD form; provide cash or your bank account details based on the medium you choose.
• You will need to furnish your PAN card details if the DD amount exceeds ₹50,000.
• If you choose to pay through your bank account, you must provide your account details to the bank employee.
• After preparation of your demand draft, check all the details carefully, including the payee’s information and the total amount to be paid.
• Consider the DD validity to ensure it doesn’t expire before the usage.

How to Encash a DD?

As a precaution against fraudulent transactions, you can’t encash demand drafts in cash. Here’s how it works now:

• As a payee, you are required to submit the demand draft to your bank.
• Once processed, the payment will be credited to your bank account, ensuring enhanced security.

RBI Guidelines for DD in Cash

Here are some guidelines outlined by the RBI regarding DD:

• Banks must issue demand drafts for amounts of ₹50,000 and above only by debiting your account or accepting cheques or other instruments, except cash.
• You cannot encash demand drafts; the bank at which you have deposited the draft will deposit it into your bank account.
• For transactions over ₹50,000, you must provide your permanent account number (PAN).
• The demand draft validity stands at 3 months after issue, and the process for revalidation is also allowed after 3 months.

With these simple steps, you can complete the demand draft procedure. The payee can credit the amount in their bank account by submitting the demand draft at their nearest branch. Equipping yourself with these details about a DD makes it easy for you to transfer funds across bank accounts without the risk of rejection. 

Whether you are waiting to cash in a DD or need to create one, you can access funds without hassles on Fibe. With our Instant Personal Loan, you can avail of up to ₹5 lakhs within minutes, even if you are new to credit. Download our Personal Loan App or register on the website for quick funding at affordable rates! 

FAQs on Demand Draft

How do you make a demand draft?

Check the process of requesting a DD below:

• The process starts with going to the bank and requesting a DD form.
• Fill in the details like your name, the names of the payee and drawee, the amount, the reason, etc.
• Payment of the amount for which you want to create a DD.
• Once you show your ID to verify the transfer, you will receive the DD in the payee’s name.

What is DD in banking?

In banking terms, a demand draft (DD) is a negotiable instrument for transferring funds without knowing the recipient’s account details. 

How do you make a demand draft with cash?

You can visit any bank and request a demand draft form. After completing the form and submitting the cash, the bank will generate a DD for the cash amount.

Why is DD used?

A Demand Draft is used when you want to make secure payments. It’s commonly used for college fees, application forms, large deposits or transactions between two different banks.

How to withdraw money from a DD?

The person whose name is on the DD needs to deposit it into their bank account. Once processed, the amount gets credited just like a cheque.

What is the maximum limit of DD?

There is no fixed upper limit for issuing a DD. However, if the amount is ₹50,000 or more, PAN details are mandatory as per RBI rules.