Demand Draft: A Safe and Secure Way to Transfer Money

A demand draft, often referred to as demand draft 1, is a written order issued by one branch of a bank to another branch of the same bank, explaining the demand draft meaning, directing them to pay a specified sum of money to a designated individual or their order. Demand drafts are always payable immediately upon presentation. Banks issue demand drafts when someone wants to send money from one location to another. As per Section 85-A of the Negotiable Instrument Act, a demand draft represents an order to pay money drawn by one office of the bank upon another office of the same bank, with certain demand draft charges, making a sum of money payable to the order holder on demand. This is what a demand draft is, and it serves as a secure and convenient way to transfer funds.

To obtain a demand draft, an individual must pay the required amount in advance to the bank. The bank then issues the demand draft. The purchaser of the draft can subsequently send it to the payee’s location via regular or registered mail. The bank that issues the draft typically charges a commission for providing this service.

Demand Draft Meaning

A Demand Draft Meaning is a financial instrument employed to transfer funds from one bank account to another. It is akin to cash but offers a higher level of security. Several secure features characterize Demand Drafts, including:

  1. Highly improbable to be stolen and misused.
  2. Eliminates the risk of counterfeit currency circulating in India.
  3. Can only be cashed by the intended recipient.
  4. Easily portable, with no threat to personal safety from potential robbers.
  5. Simplifies sender identification.
  6. Can be securely dispatched via courier or postal services.
  7. Conveniently cancellable if needed.
  8. Widely recognized and preferred for various payment purposes, such as applying for educational admissions, paying fees, and subscribing to services.

These features make Demand Drafts a reliable and versatile method of financial transaction.

List of Parties:

A demand draf. involves three key parties:

  1. The drawer branch.
  2. The drawee branch.
  3. The Payee.

The recipient of the draft can conveniently access the funds from their local branch, often situated near their residence. Notably, the purchaser of a demand draf. does not necessarily need to be an existing customer or account holder of the bank. This service is extended to the general public by the bank.

Legal Validity of a Bank Draft

Bank Draft as a Negotiable Instrument:

  1. It is a written instrument.
  2. It bears an unconditional order.
  3. It is signed by the issuer.

While the Negotiable Instrument Act does not explicitly mention bank drafts as negotiable instruments, their resemblance to bills of exchange leads to their consideration as such.

Cancellation of Bank Draft

While a bank draft is recognized as equivalent to a cheque for certain purposes, it differs from a cheque in terms of the issuing bank’s position. A cheque is drawn by the drawer on their own bank, and the drawer has the right to stop its payment before it is actually made. However, when it comes to a bank draft, the purchaser of the draft is not in the same position as the drawer of a cheque. In fact, the drawer of a draft is not considered a party to the instrument.

demand draft

The parties involved in a bank draft are the issuing branch, the paying branch, and the payee. When a bank issues a draft, it commits to paying the specified amount to the payee, who is a third party to the draft, in exchange for consideration from the purchaser of the draft.

As a result, the purchaser of a draft does not have the right to stop the payment of a draft, and the bank should not comply with any stop payment instructions provided by the purchaser. Once the bank draft is passed to the payee, the payee obtains rights in the instrument. These rights cannot be invalidated by a stop payment order issued by the purchaser. If the payee has endorsed the draft in good faith and for value to a third party, they acquire rights that are enforceable against the bank. These rights remain unaffected if a dispute arises between the purchaser of the draft and the payee after the draft has been delivered to the payee.

Canceling a Demand Draft

Explore Detailed Articles through the Following Link: Demand Draf. Cancellation

Issuing a Duplicate Demand Draft

Explore Detailed Articles through the Following Link: Duplicate Demand Draft


What is a demand draft?

A demand draf. is a financial instrument issued by a bank on behalf of one person to another, directing the payment of a specified sum of money on demand. It is a secure and widely accepted method of transferring funds.

How can I obtain a demand draft?

To obtain a demand draft, you need to visit your bank or financial institution where you have an account. You’ll need to provide the amount you want the demand draf. for, the name of the payee, and pay the draft’s face value along with any applicable charges. The bank will then issue the demand draft.

What are the charges for a demand draft?

The charges for a demand draft vary from bank to bank. Typically, the charges are based on the amount to be paid, and there may be additional fees for urgent or out-of-town demand drafts. You can inquire about the specific charges at your bank.

Is a demand draft safer than a check?

Yes, a demand draf. is generally considered safer than a check. Since the money is prepaid, there is no risk of insufficient funds or a bounced draft. Demand drafts are also less susceptible to fraud and are secure for both the sender and the recipient.

How long is a demand draft valid?

The validity of a demand draf. varies from bank to bank, but it is usually valid for a specified period, typically three to six months. After the expiration date, the demand draf. becomes void, and the money cannot be claimed.

Sanjeet Kumar is a graduate of Journalism, Psychology, and English. Passionate about communication - with words spoken and unspoken, written and unwritten - he looks forward to learning and growing at every opportunity. Pursuing a Post-graduate Diploma in Translation Studies, he aims to do his part in saving the 'lost…

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