Demand Draft

Demand draft is discussed in section 85(A) of the NI Act. A Demand draft is an order to pay money drawn at one office of a Bank upon another office of the same bank for a sum of money payable to order on demand.

  • A Demand Draft is payable on demand
  • A Demand Draft can NOT be paid t a bearer
  • A DD is negotiable and its features are similar to Bill of Exchange and NOT a Check.
  • If a Bank fails to honor the Draft, the Bank is liable and not the person.
  • If there are wrong signatures on the Bank Draft, the Bank is liable.
  • If there is a prior arrangement , the DD can be payable by different bank also.

A person reaches the Bank with a Demand Draft payable to his account. At this situation, the Bank works as which of the following?

  1. Creditor
  2. Debtor
  3. Beneficiary
  4. Trustee

Answer to the above question is D (Trustee). This means that when a Bank draft is purchased , the relations between the purchaser and bank are that of a debtor and creditor , and as soon as this bank reaches the Payee, the Payee becomes beneficiary and the Bank becomes trustee.

Please note that once, the payee gets a DD, the payment CANNOT be stopped unless there is an order by a competent court. So,

  • When a draft reaches a payee, the relationship between the purchaser and Bank comes to an end.

Please note these points:

  • A demand draft can be prepared with cash payment if the value is less than ` 50,000.
  • For a value of ` 50,000 or more, only paid through bank account.

Draft is valid for 6 months. On expiry of this date, the draft can be revalidated by the Bank.

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Comments

  • DHIRESH TRIPATHI
    Reply

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    Reply

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  • DHIRESH TRIPATHI
    Reply

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  • surbhi agrawal
    Reply

    its fun to read this site..easy and in lucid manner

  • surbhi agrawal
    Reply

    big thumps up for this site ..good going owners

  • balwinder singh choudhary
    Reply

    From 1st April 2012, Validity of cheque and bank drafts have been cut short to just three months instead of the earlier six.

  • balwinder singh choudhary
    Reply

    RBI also asked banks to ensure that account payee cheques and drafts are only credited to accounts of the person named in the instrument.
    Drafts above 20,000 will have to be a/c payee only .

  • Prabu Shankar
    Reply

    This site is much useful for studies for all exams…. thank you so much who updates this……

  • siddharth gupta
    Reply

    kindly correct
    draft is valid for 3 months

  • mayank patel
    Reply

    my draft is out dated. i go to bank, they ask me to get singed from payye to refund the same. what to do now?

    • asimabbas

      if demand draft is issued in the favour of govertments/taxes and revnues, being a banker should we approach applicant before revalidating or will honour / pay the same in central bank clearing.

  • KUNDAN M. JETHWANI
    Reply

    we have a demand draft of rs 32489.00 dt 04.03.2010.. my father died on 11.03.2010 checked drawer today 08.03.2015 .what will be the procedure to get new demand draft. kindly help me

  • murugan
    Reply

    sir pl clarify to me, how many can a DD be revalidated ?

    tk u pl

  • subash
    Reply

    Wheather a written dd is valuable or not??

  • deepak kumar
    Reply

    My DD get washed by water.
    i.e.Only the background get washed.

    Will it get accepted by my college.

    • nishanth84

      my dd got stained by oil a bit. is it still valid?

  • Sarita
    Reply

    MY DD is lost in transition to a company now will it be refunded from bank??

  • jai ghanekar
    Reply

    can we find out the bank which asign the dd on reference of dd no??
    also i want to know that two banks have the same dd number?? pls reply fast on my email id