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Cheques and demand draft are increasingly losing their place as instruments that are used for payments as, most individuals are today making payments through the RTGS, NEFT,IMPS mechanism. But still today many applications for jobs, examinations, admissions, services, high amount purchases, etc. require  demand drafts rather than cheques. As Cheques can be dishonoured due to insufficient balance, but Demand Draft cannot be dishonoured. This article looks as steps to make a Demand Draft offline by filling form and online, What is Demand Draft,shows sample image of Demand Draft, What is Banker’s cheque. how to get Demand Draft cancelled, what happens when demand draft expires.  How does Demand Draft differ from cheque,  from Banker’s cheque.

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 Vizag engineer sends Kejriwal Rs 364 to save CM from embarrassment

Example of Demand Draft with explanation

Example of Demand Draft with explanation

No Explanation Entry in the DD Details
1 Bank branch at the top left State Bank of India MADHAVADHARA Branch The branch of bank issuing the DD
2 To Pay Chief Minister of Delhi Who gets the amount specified in the DD
3 Date 01/02/2016 Date of issue of DD (Validity period is 3 months)
4 Amount Three hundred and sixty four only The amount payable to the party in words
5 Amount 364 The amount payable to the party in figures
6 Branch, at bottom State Bank of India The branch of bank which pays the amount
8 DD number at the bottom 596203 Number of DD
7 on the right Signatures Signatures of the officers of branch issuing DD

Charges to make Demand Draft

Though RBI advocated reasonability of service charges for demand drafts as early as February 2007, it did not prescribe any explicit thresholds or measures of reasonability . So each bank charges own rates for making demand draft.

For example SBI DD making charges for Above ₹ 10,000 upto ₹ 1,00,000 are  ₹5 per ₹1000 or part thereof

  • So to calculate find charges per 1000 = 5/1000=.005
  • Use this to multiply with amount
  • For DD of amount Rs 12000 charges are 12,000 * .005 = 60
  • For DD of amount Rs 22,500 charges are 22,500 * .005 = 112.5

Charges of Demand Drafts of SBI and ICICI bank are given below.  Interested readers can go through A note on demand draft charges levied by banks in India in 2010 (pdf) by students of Department of Mathematics of IIT(Mumbai).

RBI webpage has link to service charges of the banks.

If you have salary account then you may have no demand draft making charges upto some amount. For example for salary account in HDFC bank drafts upto 1 lakh are free per day.

Charges SBI ICICI Bank
DD- Issue
  • Upto ₹ 5,000/- ₹25/- (incl. ST)
  • Above ₹ 5,000/- upto ₹ 10,000/- ₹ 50/- (incl. ST)
  • Above ₹ 10,000/- upto ₹ 1,00,000/- ₹5/- (incl. ST) per ₹1000/- or part thereof (Min.₹55/-incl.ST)
  • Above ₹ 1,00,000/- ₹ 4/-(incl. ST) per ₹1000/- or part thereof Min.₹505/-incl.ST Max.₹15000/-incl. ST
  • Rs.50 per D.D. up to Rs.10,000
  • Rs.3 per thousand rupees or part thereof for DD of more than Rs.10,000, subject to a minimum of Rs.75 and maximum of Rs. 15,000
DD- Issue by deposit of cash No Cash Handling charges will be levied in addition to charges as above for issuance of IOI (Demand drafts/ Bankers’ cheque) in case of cash transaction Rs.4 per thousand rupees or part thereof, subject to a minimum of Rs.100 and maximum of Rs. 15000
DD – Cancellation / Duplicate / Revalidation ₹ 100 + ST For Instrument value upto Rs.200 – Nil
For Instrument value above Rs.200 – Rs.100
PO-Issue
  • Upto ₹ 5,000 – ₹25 (incl. ST)
  • Above ₹ 5,000 – upto ₹ 10,000/- ₹ 50/- (incl. ST)
  • Above ₹ 10,000 – upto ₹ 1,00,000/- ₹5/- (incl. ST) per ₹1000/- or part thereof (Min.₹55/-incl.ST)
  • Above ₹ 1,00,000 – ₹ 4 (incl. ST) per ₹1000 or part thereof Min.₹505 incl.ST Max.₹15000/-incl. ST
Rs.50 for PO of upto Rs.10,000,

For PO above Rs.10,000- Rs.2.50 per thousand rupees or part thereof, subject to a minimum of Rs.75 and maximum of Rs.15000

For Senior Citizen, Student & Rural locations : For amounts upto Rs.10,000– Rs.40, For amounts above Rs.10,000 till Rs.50,000 – Rs.60, For amounts above Rs.50,000– Rs.2.50 per thousand rupees or part thereof (maximum of Rs.15,000)

PO – Issue by deposit of cash No Cash Handling charges will be levied in addition to charges as above for issuance of IOI (Demand drafts/ Bankers’ cheque) in case of cash transaction Rs.150 per PO for amounts up to Rs.50,000, For PO above Rs. 50,000 Rs.4 per thousand rupees or part thereof, subject to a minimum of Rs.150 and maximum of Rs.15000
PO – Cancellation / Duplicate / Revalidation ₹ 100 + ST For Instrument value upto Rs.200 – Nil
For Instrument value above Rs.200 – Rs.100

Overview of Steps to make Demand Draft

You can make the Demand draft by visiting the bank. If you have account in the bank then you can pay by cheque. Else you need to pay by cash. You can also make Demand Draft online. If you make the demand draft by visiting the bank then you will get Demand Draft within 30 mins. But if you order it online then it would take few days and would be delivered to your corresspondance address.

Whenever you receive the Demand Draft,

  • please check details , payable, amount etc before leaving the bank.
  • Keep the photo copy of the DD or picture or scan copy of DD.

How to make Demand Draft

1. Fill the form– Visit any bank and ask for a demand draft application form or fill the form online.

2. Form Details– You need to fill up the details like the mode in which you want to pay through cash or from your account using cheque.  in whose favour the DD is to be made (beneficiary),  the amount , the place where DD will be encashed, cheque number,your bank account number, your signature etc

3. Demand draft charges– The bank will provide the demand draft once you submit the form along with the money/cheque and the demand draft charges. The charges vary from bank to bank

4. Pan card details– If amount exceeds more than Rs 50,000 and you are paying my cheque then PAN card details needs to be submitted.

Make Demand Draft by filling Form at bank

For the details given below, SBI form for Demand Draft from YouTube video is shown below.

  • Name in whose favor DD is required or to whom you want to pay: The University of Kanpur
  • City where DD is payable: Ahmedabad
  • Draft amount: 5,000
  • Branch name where DD is applied for Bangalore
  • Amount of commission : Rs 370
  • Name of applicant: Anil Kumar, 4/4 M G road Bangalore
Form to fill SBI Demand Draft

Form to fill SBI Demand Draft

Make Demand Draft online

You can fill details online and can decide to collect in person from your branch or delivered through courier. Through courier it may take 2-5 days. You may be charged for courier.

Many banks also allow demand draft to be delivered to beneficiary address in India. For example HDFC says All the Demand Draft requests will be processed on the next working day. DDs will be couriered to the mailing address/ provided beneficiary address within 3 to 5 working days. 

Following video shows how to make the DD online using SBI Internet Banking.

Can Demand Draft be made using Cash

Yes. One could buy a DD against cash. The DD issuing bank might seek the ID and address proof and if the amount of DD exceeds Rs.50,000, then PAN Card also would be mandatory. The DD commission for the DDs bought against cash may be higher than that for cheque DDs.

Cancellation of Demand Draft

Once you create (Demand Draft) DD, the amount will be deducted immediately from your account. If for any reason, you want to cancel the DD and want to get the deducted money back into your account, you must have to go to bank. There is no online facility in any banks in India to cancel the DD.

If you already have original DD, there can be two cases.

1- You got the DD by paying cash- If you got the DD by cash deposit, you need to submit original DD as well as receipt of cash payment. Amount will be refunded to you in cash immediately with some deduction of amount (around Rs 100-150).

2. If you paid the amount of DD from your account- In this case you just need to submit original DD with filled cancellation form. Amount will be credited back into your account with some cancellation charge of around Rs 150.

If you don’t have Original DD with you (you may have lost the DD in your home or it may get lost in postal service etc), then the process of refunding or cancelling the DD it tough work.

To cancel the DD and if you don’t have the original DD with you, you need to sign Indemnity bond in stamp paper for the bank. After that, most of the bank refund the amount with taking some time i.e within one week, but some bank will take time till expiry date of DD.

If Demand Draft gets expired

In India, a demand draft is valid for a period of 3 months from the date of issue. If it is not presented within three months the Demand draft will not be valid but money will not be automatically refunded. Then the purchaser of the draft should approach the branch concerned bank which issued the draft and submit an application for revalidation of the draft. Please note, the payee (the person named in the draft) cannot approach the bank for revalidation of the draft, or for that matter, any other person.

The draft will be revalidated by the bank branch after verifying their original records, and would extend validity period by another three months from the date of revalidation.  A draft which has been revalidated once, cannot be further revalidated, which means that you have to present the draft to the bank within the revalidated period.

Banker’s Cheque

Currency ,cheques, demand drafts, Banker’s cheque, Payment order, Payable ‘At Par’ cheques  (Interest/Dividend warrants, refund orders, gift cheques etc.), are used as paper payment methods. The statutory basis for these instruments are  provided by the Negotiable Instruments Act, 1881 (NI Act). These are covered in RBI document: Payment Instruments in India  

A Negotiable Instrument means a written document transferable by deliver.  A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, with the payer named on the document, so it may not be transferred from the holder or named party to another. Negotiable Instruments are crossed cheque, Bank Draft, Billl of Exchange, Promissory Notes.

Modern payment methods,non paper based are: NEFT, RTGS, IMPS, UPI,Mobile Banking, Digital Wallets etc.

What is Banker’s cheque? How is Banker’s cheque different from Demand Draft?

Banker’s cheque is another payment instrument similar to a demand draft. Banker’s Cheque is issued for transfer of money within the local boundaries, whereas the Demand Draft is issued for transferring money of the person residing in two different places. Bankers cheque can be cleared in any branch of the bank provided it comes under the local jurisdiction, but Demand Draft can be cleared at any branch of the same bank irrespective of the city.

So if you are from Bangalore and have to pay Demand draft in Bangalore you would be given Banker’s Cheque.

BASIS FOR COMPARISON BANKER’S CHEQUE DEMAND DRAFT
Meaning Banker’s Cheque or Payment Order is a cheque issued for making the payments within the same city. Demand draft is a negotiable instrument used to transfer money from one person at one city to another person in another city.
Validation Period Banker’s cheque is valid up to 3 months from the date of issue. Demand draft is also valid up to 3 months from the date of issue.
Special feature All banker’s cheque are pre-printed with “NOT NEGOTIABLE”. Demand draft of Rs. 20000 or more should be issued with “A/c payee” crossing.
Clearance It can be cleared in any branch of the same city. It can be cleared at any branch of the same bank.

Difference between Demand Draft and Cheque

There are three parties to the cheque- Drawer (maker of the cheque), Drawee (bank on which the cheque is drawn), Payee (to whom the amount of the cheque is payable).

In the case of demand draft there are two parties involved in it, one is drawer (bank or any financial institution), and the other is payee (to whom the amount is transferred).

Description CHEQUE DEMAND DRAFT
Purpose Make payment in a safe and easy mode To transfer money from one place to another.
Who issues it Cheques are issued by the customers of the bank Bank itself issues the Demand Draft.
Meaning Cheque is a negotiable instrument which contains an order to the bank, signed by the drawer, to pay a certain sum of money to a specified person. Demand Draft is a negotiable instrument used for the transfer of money from one place to another.
Payment Payable either to order or to bearer. Always payable to order of a certain person.
Bank Charges No Yes
Drawer Customer of the bank. Bank itself.
Parties Involved Three Parties- Drawer, Drawee, Payee.

Drawer (maker of the cheque), Drawee (bank on which the cheque is drawn), Payee (to whom the amount of the cheque is payable).

Two Parties- Drawer, Payee.

one is drawer (bank or any financial institution), and the other is payee (to whom the amount is transferred).

Dishonour Yes, due to insufficient balance or other similar reasons. No

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