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  • What Is A Demand Draft Know The Types Procedures Charges And More

What is a Demand Draft? Know the types, procedures, charges and more

  • Updated on: 13 Jun 2024
  • Published on: 22 Aug 2023
What is a Demand Draft? Know the types, procedures, charges and more

When comparing demand draft vs cheque, you’ll find that both are safe bank transaction methods. However, a DD is one of the most popular payment systems or instruments used by banks for the longest time. 

Despite the digital revolution and the increasing popularity of alternate banking modes, many prefer using demand drafts due to their security features. You can use it to execute inter-banking transactions and enjoy seamless money transfers. 

Read on to learn the demand draft validity, types and more.

What is Demand Draft in Banking?

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 making a written request to the issuing bank.

Difference Between a Cheque and a Demand Draft

Here are some key points of difference to consider when comparing a demand draft vs a cheque:

BasisDemand DraftCheque
ProcessIt is a pre-paid instrument that banks issue on their behalf It is a written order by an individual to their bank for payment of a specific amount to another party
Issuing AuthorityBanks exclusively issue demand draftsAny entity that holds a bank account can issue a cheque
Additional ChargesThe banks may charge a fee to issue a demand draft, which generally depends on its valueA cheque generally doesn’t involve any fee, except for bounce charges applicable in case of insufficient funds in the bank account
Guarantee of PaymentBeing pre-paid instruments, they provide a guarantee of payments As there’s always a risk of cheque bouncing, this payment is not guaranteed
Payment ConfirmationDemand drafts provide payment confirmation when banks issue them The banks provide confirmation after the issued cheque is cleared
Involved PartiesThese banking instruments involve two parties: the bank (drawee) and the recipientThree parties are involved in the issuance of a cheque: the payer, the drawee bank and the payee
SafetyThey provide a higher level of security because only the designated payee can claim the amountIf you don’t mark it as ‘Account payee’, cheques can be risky if they fall into the wrong hands
Acceptance Businesses and other entities generally accept these instrumentsBusinesses may not accept cheques due to the risk of bouncing

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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 transfer the demand draft amount to their bank account after a specific time, as mentioned on the DD.

Charges for Demand Draft

When you make a demand draft, you must pay a specific charge to process your request. 

Here are the general charges that apply:

Charge TypesAmount
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.

Also Read: What Is a Post-Dated Cheque?

Process of Applying for a Demand Draft

The demand draft procedure starts at the bank, where you must fill in the form. Here are the steps you can follow.

  • Step 1: Request a demand draft form from your nearest bank branch or get it online.
  • Step 2: Fill up the form with the required details.
  • Step 3: Pay with cash or from your bank account; if choosing the latter, share your account details with the bank employee.
  • Step 4: Provide your ID and address proof, and if the amount exceeds ₹50,000, provide your PAN details.
  • Step 5: The bank employee will process your details, and make a DD and you can pay the charges.
  • Step 6: Collect the DD and check the details before leaving 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 via your bank account, you need to provide your bank 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 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 to get quick funding at affordable rates! 

FAQs on Demand Draft

How to 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 and the names of the payee and drawee, amount, 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 or DD is a negotiable instrument that you can use to transfer funds without having the account details of the recipient. 

How does a DD work?

Here’s how a demand draft works:

  • When you initiate a fund transfer with a DD, the money gets deducted from your account.
  • When the payee deposits this instrument within the DD validity timeline, the amount is immediately transferred to their account, and the transaction is complete.

How to 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.

How does the demand draft work?

A demand draft allows you to transfer funds from one account to another in an offline mode. Here’s how it works:

  • Once the bank prepares the demand draft on the request of the drawer, the amount gets deducted from the drawee’s bank account.
  • When the payee submits the DD within the validity period, they receive the amount in their bank account.
  • This process ensures the transaction is secure and based on the unique DD number.

How to encash a demand draft?

You cannot encash a demand draft. The amount can only be transferred into your bank account.

How to make DD online?

To make a demand draft online, follow these simple steps:

  • Log in to your bank’s net banking portal and navigate to the demand draft issue section, generally under the requests or services tab
  • Fill in the form with the required information
  • Enter the amount and make an online transaction from your bank account
  • Choose your preferred mode of delivery and submit the form
  • Collect your DD and submit it to the concerned party

How to fill the demand draft?

Bank employees make a demand draft at your request, and all you need to do is fill in the form at a bank or online. The information you need to enter includes the following: 

  • Details of the payee
  • The date of the issue of the DD
  • The amount in the DD in words
  • The unique DD number associated with each DD
  • The bank branch issuing the DD
  • Stamp and signature of the bank issuing the DD

Can a DD be deposited in any bank?

No, you can deposit the demand draft in the bank branch mentioned on it.


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