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

Updated on: 31 August 2023

Published on: 22 August 2023

What is a demand draft, this is a common question you may have in reference to transferring money safely. Popularly known as DD, it is one of the most popular payment systems or instruments used by banks for the longest time. You can use a DD to execute inter-banking transactions and enjoy seamless money transfers. 

Despite the digital revolution and the increasing popularity of alternate banking modes, many prefer using demand drafts due to their security feature. 

Read about demand draft validity and the various types, charges and procedures below. 

What is Demand Draft in banking?

A demand draft 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. 

With the demand draft, you can deposit money into any bank account even if you do not have information regarding the recipient’s account number, IFSC code and other data. According to the RBI’s guidelines, demand draft validity only extends up to 3 months after it is issued.

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Types of Demand Draft

Here are the two main demand draft types and their distinguishing characteristics:

1. Sight Demand Draft

This type of demand draft is immediately payable. The payee can receive the amount in their bank account by presenting proof of identity. It is generally used for international transactions, ensuring a prompt transfer.

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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 charges that apply:

Some banks may levy zero charges for cancelling or revalidating a DD of small amounts. 

Process of Applying for a Demand Draft

The Demand Draft procedure starts at the bank, where you must fill in the DD form. Here are the steps you can follow.

Step 1: Request a demand draft form from your nearest bank branch

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 for the Demand Draft creation

Step 6: Collect the DD and check the details before leaving the bank

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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 bank. Remember, per the RBI’s new guidelines, Demand Draft validity is only up to 3 months. Limited DD validity ensures that it does not circulate in the market and funds get transferred between trusted parties. 

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. 

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FAQs on Demand Draft

How to make a Demand Draft?

Making a Demand Draft starts with going to the bank and requesting a DD form. On the form, fill in the details like your name and the names of the payee and drawee, amount, reason, etc. 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?

When you initiate a fund transfer with a demand draft, the money gets deducted from your account. When the payee deposits this instrument within the DD validity timeline, 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. 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 Demand Draft 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, log in to your bank’s net banking portal and navigate to the Demand Draft issue section. Then, fill in the Demand Draft form with the required information. Now you need to enter the amount and make an online transaction from your bank account. Finally, visit your nearest bank branch and submit the form.

After you have raised the request to make a Demand Draft, you will receive a confirmation on your registered mobile number. You can collect the Demand Draft from the bank branch using the reference number. 

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 Demand Draft form at a bank or online. The information you need to enter includes your name and address, the receiver’s name and address, the city, the amount and your signature.