Demand Draft : DD Meaning, Types, Benefits & DD Charges
Reviewed by: Fibe Research Team
- Updated on: 27 Jan 2025
- Published on: 22 Aug 2023
Reviewed by: Fibe Research Team
When comparing demand draft vs cheque, you’ll find that both are safe bank transaction methods. However, a DD is one of the most popular payment systems or instruments used by banks for a long time.
Despite the digital revolution and the increasing popularity of alternate banking modes, many prefer demand drafts due to their security features. Demand drafts allow you to execute inter-banking transactions and enjoy seamless money transfers.
Read on to learn the Demand Draft Charges, their validity, 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 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 certain documents, including 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 transmit the DD amount to their bank account after an exact time, as noted on the DD.
Demand drafts stand out as monetary tools provided by the banks. They work when the drawer visits the bank and requests a DD. The bank then delivers the payee’s details and the amount.
The charge is then debited from the account, or the drawer produces the amount in cash. The drawer also has to pay extra fees, if required. The bank will then administer the DD, which is given to the payee.
The useful thing about DDs is that they cannot bounce because of inadequate funds. They also don’t require any signature and stay useful for 3 months to 6 months.
Apart from knowing the demand draft meaning, it is also important to uncover differences when comparing a demand draft vs a cheque.
| Basis | Demand Draft | Cheque |
|---|---|---|
| Process | It 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 that 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 confirm 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 bouncing |
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When you make a demand draft, you must pay specific Demand Draft Charges 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 |
Disclaimer: These charges are subject to vary depending on the bank.
Once you know what a bank dd means, its procedure starts at the bank, where you must fill in the form. Here are the steps you can follow.
Take into account the following points when issuing a DD:
As a precaution against fraudulent transactions, you can’t encash demand drafts in cash. Here’s how it works now:
Here are some guidelines outlined by the RBI regarding 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 branch. Equipping yourself with these details about a DD makes it easy for you to transfer funds across bank accounts without the risk of rejection.
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Check the process of requesting a DD below:
In banking terms, a demand draft (DD) is a negotiable instrument for transferring funds without knowing the recipient’s account details.
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:
No, you can deposit the demand draft at the bank branch mentioned in it.
