Banking

Understanding Demand Draft (DD) Full Form: Types, Features, Advantages, Limitations

Understanding Demand Draft (DD) Full Form: Types, Features, Advantages, Limitations

Last Updated : Oct. 18, 2023, 12:09 p.m.

Travelling with huge amounts of cash, performing transactions involving multiple people or even dealing with cash is a thing of ancient times. The development of banks has revolutionised the transfer of money, offering multiple methods of payment. Besides direct transfer through UPI, account numbers and other methods, an official and offline transaction method is through demand draft. The DD full form in banking is a demand draft. Let us explore the application method along with its associated benefits.

What is Demand Draft?

The demand draft full form in banking is Demand Draft. It is a secured method of payment or transaction between two different banks. The value is set based on a mutual decision between the beneficiary and the drawer. The bank generates the demand draft with the seal, guarantees the debit of money from the drawer’s account, and receives it into the beneficiary’s account. The general usage is seen among transactions between strangers or unknown parties, like while purchasing a property or submitting college fees. 

Types of Demand Draft

The banks offer two types of demand drafts: sight and time. The sight demand draft is more suited for international purchases. These are faster in payment. The time-demand draft isn’t immediately payable. Rather, they are associated with certain dates to make them functional for payment. The time demand drafts can not be used until the date has passed post receiving the goods on purchase. These are also applicable in international trade to gain the trust of the receiver without actually making the payment.

How to Apply For Demand Draft?

Individuals requiring the demand draft need to follow below provided a sequence of steps: 

Step 1: The drawer must visit the bank and look or ask for a demand draft form. Nowadays, the options are available through online mode as well. 

Step 2: Fill in all the details required in the form. The drawer will fill the form to generate the demand draft and hence will require its own account details and the beneficiary account details or the name of the account. They must also be aware of the bank branch of the beneficiary. 

Step 3: Submit the form to the bank. The bank representative will check the details and provide the drawer copy back. They will provide an estimate of the time to take the demand draft, which depends on the load of work in the bank. Banks also charge a minimal amount for generating demand drafts, which is a certain percentage of the demand draft amount. The value varies among different banks.

Step 4: The drawer or applicant or any known person can receive the demand draft once by validating themselves by showing the drawer copy of the form. The demand draft receiver will get the seal on the drawer copy of the form for proof. 

Note that money is debited from the account when the demand draft is generated, regardless of when the demand draft is received and claimed in the bank by the beneficiary.

Information to be Filled in Demand Draft Form

The necessary information to be filled in the Demand Draft form to generate the demand draft are: 

  • Name and address details of the drawer
  • Name of the drawee
  • Name and address details of the beneficiary
  • Name of the city and bank branch where the demand draft is to be deposited
  • The amount payable to the drawee (in words and figures)
  • Exchange fee that varies according to the bank 
  • Signature of the drawer
  • PAN card number if the transaction amount exceeds INR 50,000

Features of Demand Draft

The Demand Draft has multiple particular features like: 

  • Not payable to the bearer 
  • The purchaser of the demand draft need not be a customer of the bank 
  • demand draft is payable only on demand 
  • Amount is returned on non-delivery of demand draft 
  • Does not contain a stamp on the demand draft 
  • No one can stop except Demand Draft by court order 
  • Values can change through endorsement and delivery 

Advantages of Demand Draft

The advantages of demand draft include:

  • It is a valid and safe method for cross-border investments and purchases 
  • Bank holds guarantee for funds associated with Demand Draft 
  • They are reliable owing to the no loss of funds often witnessed in electronic transactions 
  • Can be obtained from any bank

Limitations of Demand Draft

  • Wrong input of information in demand draft form can lead to loss of funds 
  • Cashing the demand draft on getting lost or stolen is not covered by the bank
  • Validity remains for 3 months, and the encashment isn’t the responsibility of the bank 
  • Causes extra charges of money
  • It may take a few hours or days to generate and get cleared.

Conclusion

The money transaction methods have been multiple. Talking of a few years ago and currently common in some places, demand drafts are the safe methods of transaction. With promised money received by the beneficiary these are also associated with certain limitations like the requirement of charges and the inability to encash them. Currently, the transaction method has been replaced with online services that offer a comfortable transfer of money within a span of a few seconds. 

FAQs

1. How to debit money from the Demand Draft?

Direct debit of money in hand is not possible with a demand draft. The beneficiary can obtain owed money to the drawer through a bank account. The beneficiary needs to submit the demand draft to the bank, where it is processed, and the money is debited.

2. How is a demand draft different from a cheque?

Demand drafts differ from cheques in several aspects. A demand draft is issued and drawn by the bank, while cheques are individually created and encashed. Further, the demand draft payments can not be stopped by the drawer, while it can be in the case of the cheque.

3. Why aren’t demand drafts as common as they used to be earlier?

Demand draft requires several working hours for the bank to be generated. Further, providing the demand draft to the beneficiary requires physical translocation. The easy alternatives are net banking, UPI transactions and mobile number and account number linked payments, which transfer money within seconds from the comfort of wherever the drawer is.

4. How are Demand drafts a safe option over cheques?

Demand drafts are issued by banks. Individuals cannot issue them. Moreover, the demand draft is only issued if the drawer has sufficient funds in their account, unlike cheques, which are issued by individuals and get bounced if there isn’t sufficient amount. Hence, demand drafts are a safer option for receivers.

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