When comparing demand draft vs cheque, you’ll find that both these are safe methods of bank transactions. 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 what is demand draft, its validity, the various types and more.
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:
Here are some key points of difference to consider when comparing a demand draft vs a cheque:
| Basis | Demand Draft | Cheque |
|---|---|---|
| Process | Demand Draft 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 Authority | Banks exclusively issue demand drafts | Any entity who holds a bank account can issue a cheque |
| Additional Charges | The banks may charge a fee to issue a demand draft, which generally depends on its value | A cheque generally doesn’t involve any fee, except for bounce charges applicable in case of insufficient funds in the bank account |
| Guarantee of Payment | Being pre-paid instruments, they provide a guarantee of payments | As there’s always a risk of cheque bouncing, this payment is not guaranteed |
| Payment Confirmation | Demand drafts provide payment confirmation when banks issue them | The banks provide a confirmation after the issued cheque is cleared |
| Involved Parties | These banking instruments involve two parties: the bank (drawee) and the recipient | Three parties are involved in the issuance of a cheque: the payer, the drawee bank and the payee |
| Safety | They provide a higher level of security because only the designated payee can claim the amount | If 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 instruments | Businesses may not accept cheques due to the risk of their bouncing |
Here are the two main types of DDs and their distinguishing characteristics:
This is an immediately payable DD. 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.
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.
When you make a demand draft, you must pay a specific charge 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 |
| Charges for DD revalidation | 0 – ₹100 + GST |
Disclaimer: These charges are subject to vary depending on the bank.
Also Read: What Is a Post-Dated Cheque?
The demand draft procedure starts at the bank, where you must fill in the form. Here are the steps you can follow.
Take into account the following things when issuing a DD:
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. 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 lacs 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!
Check the process of requesting a DD below:
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.
Here’s how a demand draft works:
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.
A demand draft allows you to transfer funds from one account to another in an offline mode. Here’s how it works:
You cannot encash a demand draft. The amount can only be transferred into your bank account.
To make a demand draft online, follow these simple steps:
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:
