Scribd
Upload
180 views1 page

Demand Draft

Demand draft is a method used by banks to transfer money directly from one bank account to another without requiring the signature of the account holder. Demand drafts differ from checks in that they do not require a signature to cash and can only be deposited in a bank, not paid to a bearer. They are considered safer than checks because the bank only issues them if the drawer has sufficient funds. There are two types of demand drafts: sight demand drafts, which are paid after the payee presents required documents; and time demand drafts, which are only payable after a specific period of time. Demand drafts are generally a safer option than checks, especially when dealing with unknown parties, since payment is guaranteed if

Uploaded by

prahalakash Reg 113
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
180 views1 page

Demand Draft

Demand draft is a method used by banks to transfer money directly from one bank account to another without requiring the signature of the account holder. Demand drafts differ from checks in that they do not require a signature to cash and can only be deposited in a bank, not paid to a bearer. They are considered safer than checks because the bank only issues them if the drawer has sufficient funds. There are two types of demand drafts: sight demand drafts, which are paid after the payee presents required documents; and time demand drafts, which are only payable after a specific period of time. Demand drafts are generally a safer option than checks, especially when dealing with unknown parties, since payment is guaranteed if

Uploaded by

prahalakash Reg 113
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 1

Demand Draft

Demand draft or DD is a method used by an individual or a bank to transfer money from one
bank account to another. Demand drafts differ a lot from cheques, as they do not require the
signature of the account holder to be cashed.

Also demand drafts are only issued by banks and you cannot issue them on an individual
level. These are also much safer and carry less risk of fraud as compared to cheques because
the demand draft is only issued by the bank if the drawer has sufficient funds in their account;
which is not the case with cheques.

Demand drafts are only payable on demand and they can be only deposited in the bank,
unlike cheques demand drafts cannot be paid to the bearer. Demand drafts are usually issued
when a large amount of money is in question or within parties who are unknown to each
other and thus lack trust.

A demand draft is issued by the bank, with the money from the customer’s account who
requests the demand draft. This person or customer who requests the demand draft is called
the drawer while the bank that pays the money is called drawee.

The name of the person or party who the demand draft is to be paid to is mentioned on the
DD. This person or party who receives the demand draft is called payee. The money through
this demand draft can only be transferred to the payee and no other person can receive this
DD.

Types of Demand Drafts


Demand drafts are of two types— Sight demand draft and Time demand draft.

Sight Demand draft

A sight demand draft is only approved after the payee presents certain documents asked by
the bank. If the payee fails to do so, the draft is not paid.

Time Demand draft

A time demand draft is only payable after a specific period of time. You cannot draw this
demand draft from the bank before that time.

Demand draft or cheque? What’s the better option?


Demand draft is only prepared after checking the drawer’s account balance or after the bank
receives the required payment from the drawer, this makes demand drafts a safer option as
there is no chance of payment denial on grounds of low funds. So, while dealing with an
unknown party, asking for a demand draft is always a better option.

You might also like