What is a demand draft (banker’s draft)? Explain the procedure.

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answered Aug 24, 2022 by Taraknath Pal (62.4k points)
selected Aug 25, 2022 by Ramesh nirvani

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Demand draft 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.
On the to-left corner of the demand draft the banker makes two lines across and writes ‘A/c payee’ in between. This means that the DD can be deposited in the account of only that person whose name is written on it.
Unlike cheque a draft cannot get bounced or returned by the bank i.e. the person whose name is written on it will surely get the payment.