What is Demand Draft?
The Demand Draft is a pre-paid Negotiable Instrument, wherein the
drawee bank undertakes to make payment in full when the instrument is
presented by the payee for payment. The demand draft is made payable on a
specified branch of a bank at a specified centre. In many transactions
cheque is not usually accepted as the drawer and payee are unknown and
there will be credit risk as cheque may bounce. So, in such cases Demand
draft is accepted where the transfer of money is guaranteed. Demand
draft is valid for period of 3 months.
- A Demand Draft is payable on demand
- A Demand Draft can NOT be paid to a bearer. In order to obtain
payment, the beneficiary has to either present the instrument directly
to the branch concerned or have it collected by his / her bank through
the clearing mechanism.
- Demand draft is discussed in section 85(A) of the NI Act.Negotiable Instruments Act 1881
Sample Demand Draft
Sample demand draft is shown in image below. The various fields in DD are explained below. Sample demand draft is one sent
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