Most of the banks in India uses several negotiable instruments like cheque, bills of exchange to receive and transfer fund from one customer's account to another of from one bank account to another and so on. One such instrument which is in use in our Indian Banking System is the Demand Draft.
Each negotiable instrument has its validity period, before which it has to be en-cashed. Let's understand in detail the concept of demand draft and its validity.
What is Demand Draft?
A Demand Draft is a prepaid instrument. It is a method used by an individual to initiate a transfer of funds from one bank account to another. This particular bank instrument differs from the normal cheque, as it does not require signatures to get the fund encashed.
The Demand Draft will be issued by a bank to the drawer (a bank's client), directing the bank (another branch of the same bank or a different bank), to pay the sum mentioned in the demand draft, to the person who presents the same at the counter.
The unique feature of a demand draft is this negotiable instrument is hard to counterfeit and thus it makes a secure source of fund transfer. The DD is issued by the bank only after the amount is paid to the bank and hence it cannot bounce as a cheque could.
How is a Demand Draft (DD) issued?
To get a demand draft from a bank, you will have to follow the below-mentioned steps:
- Firstly, visit the bank wherein you have a savings account.
- Now ask the bank teller to give you a demand draft form for filling in all the required details.
- Proceed further and duly fill in all the required details in the demand draft form.
- Now submit the form along with the cheque to the teller.
- The bank authorities will scrutinize all the details and post verification, you will be asked to pay the DD charges for preparing the demand draft.
- The concerned bank authorities will later stamp the DD and the same will be handed over to you.
Please Note: Individuals can also get the DD made through cash if in case you do not have a bank account or it can be done through online mode as well.
Charges for Demand Draft
The country's central bank - the Reserve Bank of India has advised the banks to charge a minimal amount for providing the service of demand draft to the customers. The central bank has not set any particular charges for demand draft. Every bank in India has its charges for issuing demand draft to their customers.
In some cases, the rate varies within the banks based on the priority points of a given customer.
How Long Does it take for Demand Draft Clearance Time?
Usually, the time taken to clear the demand draft varies from one bank to another. Generally, it gets cleared within half an hour the instrument is presented to the bank or by the end of the working day. In some cases, banks may take up to two or three working days to clear a DD.
If in case, the DD amount is large, then it will be credited only to the bank account of the customer and will not be provided by cash.
Demand Draft Validity Period
Based on the guidelines, issued by the Reserve Bank of India, a demand draft in India is valid up to three months, from the date of issue of the draft by the bank. After the lapse of three months, the customer can re-validate the DD with a written request to the issuing bank.
The revalidation of a demand draft can be done only once a year and after a year, the same demand draft will be cancelled by the bank and a new one will be issued after charging a fee that is associated with the process.