What’s a Demand Draft & Financial institution Costs for Making a DD?

Demand Draft (often known as DD) is a pre-paid negotiable instrument, whereby the Financial institution by whom the Demand Draft has been made undertakes the duty to make full fee at any time when the Instrument is introduced for fee. With a view to receive the fee, the beneficiary both has to deposit the identical in his Financial institution Account or get the identical collected by the Department who has made the DD.

Whereas making a Demand Draft, the Financial institution deducts the quantity from the Financial institution Account of the Particular person who has requested for making the Demand Draft and deposits the identical in their very own account. And when the DD is introduced for clearing, it’s the duty of the Banker to make the Cost.

It’s not necessary that you need to have a Financial institution Account within the Financial institution from the place you’re getting ready the Demand Draft. The Demand Draft will be made by paying the Financial institution in Money as effectively, however for Demand Drafts exceeding Rs. 50,000 the fee ought to be by cheque solely. Quoting your PAN No. can be essential in case the worth of the DD is greater than Rs. 50,000.

A Draft is often ready within the Indian Forex i.e. Rupees. Nonetheless, in case you’re required to make the fee in overseas foreign money, a draft will be ready in overseas foreign money as effectively. Demand Draft as a straightforward means of sending funds overseas as the chance of non-clearance of a Demand Draft is Nil. Another in style methods of sending funds overseas are through Swift Wire Switch, through Paypal Account, through Cash Switch Brokers like Western Union and so on.

Crossed Demand Draft

In case the Demand Draft is Crossed as Account Payee, it can’t be encashed over-the-counter from the Financial institution Department and may solely be cleared by depositing within the Financial institution Account of the Individual in whose favor the DD has been made. Nonetheless, in case the Instrument is just not a Crossed Demand Draft, it may be encashed with out depositing within the Financial institution Account, by encashing it over-the-counter from the Financial institution Department.

The principle objective of Crossing a Demand Draft is the be certain that the fee is cleared by the use of an account i.e. the fee is deposited within the Financial institution Account of the individual in whose favor the DD has been drawn. This helps in stopping wrongful fee to any individual and ensures that the fee is made solely to the individual in whose favor the DD has been drawn and to not any individual.

If the DD is just not crossed, the fee could be made by the financial institution to the holder of the Instrument after his correct identification. And in case, it’s a crossed demand draft, the fee could be made solely to the Financial institution Account of the individual.

RBI in its Notification dated 4th November 2011 has introduced that every one DD’s exceeding Rs 20,000 mandatorily should be Crossed.

Demand Draft Costs

There are not any normal fees for making a DD and the Costs often differ from Financial institution to Financial institution and in addition differ with the worth of the Demand Draft.

The Demand Draft Costs are variable and differ with the worth of the Draft. Banks often cost a variable price Rs. 1.5 to Rs. 4 per thousand plus Service Tax. Nonetheless, if the worth of Draft is small, they could cost flat fastened fees as effectively. The costs could also be decrease in case of Privilege Banking Clients.

In case the Particular person on whose request the Demand Draft had been drawn desires to cancel the Draft, he can submit a request for a similar together with the Demand Draft to the banker from whom the Draft had been made and the Financial institution would cancel the DD and pay you the quantity of the DD. The Draft Cancellation Costs are often Rs. 100 to Rs. 300 per DD.

Contents of a DD

A Demand Draft is ready by the Financial institution and a specimen copy of the identical is connected right here on your Prepared Reference

1. 01/09/2007:- Date on which the DD has been drawn. Previous to 1^st April 2012, a draft was legitimate for six months however w.e.f. 1^st April 2012, the Validity of DD has been lowered to 3 Months.
2. PIO Ministry of Dwelling Affairs: Identify of the Individual in whose favour the DD has been drawn
3. New Delhi: Place at which the DD is payable
4. Rs. 10: Quantity payable by this DD
5. ICICI Financial institution, Connaught Place: Identify of the Drawee Financial institution and Department
6. The Authorised Signatory of the Financial institution Department from the place the DD has been ready
7. 367217:- DD Variety of the Instrument
8. 000229000:- MICR Code of the Financial institution Banch

Distinction between Demand Draft and Cheque

A Cheque is signed by an Particular person and due to this fact there are probabilities that the cheque might or might not clear. Nonetheless, a DD is ready by the Banker and as it’s signed by a banker, the possibilities of default should not there.

You’d have seen that many organisations when receiving funds from the general public don’t settle for Cheque Funds and require that funds ought to be made by Financial institution Drafts. The rationale for that is that there are probabilities that the Cheque might get dishonoured or might not clear resulting from any cause in anyway, however that’s not the case with DD. In case of a DD, the Cost is to be made by the Financial institution who has drawn the Demand Draft and due to this fact the possibilities of the cheque not clearing are Nil.