Question

What is demand draft? How is it generated?

Answer 1

Issuing demand draft (DD):

• A demand draft (DD) is a cheque written by a bank (issuing bank) to another bank/branch asking it to pay money to the person/organization whose name is mentioned on it. Demand daft is a very secure medium for sending money to a person or an institute.
• The person who wishes to send money fills a form in the bank requesting it to issue the draft for the details mentioned in the form. Based on this the bank prepares a demand draft and mentions the receiver’s name on it and passes the order to its branch or associate bank to make the payment to the receiver. If the bank issues a draft that can be encashed only in the same branch then it is called pay-order.
• The sender of the DD needs to pay certain commission to the banks for this service.