What is the Demand Draft?

Demand draft is a negotiable financial instrument issued by the bank (under The Negotiable Instruments Act, 1881) in which a person (drawer) requests the bank to make DD for him by which his targeted institution or company or a person gets their payment without worrying about any mishappening. In short, when a bank issues a demand draft to a client (drawer), it instructs another bank (drawee) or one of its branches to pay a specific amount to the designated party (payee). 

A DD guarantees a certain amount of payment mentioning the name of the payee. It cannot be allocated to another person under any circumstances. Demand Drafts are more secure than cheques. This is because the drawer has to pay before issuing the bank draft to the bank whereas a cheque can be issued without ensuring sufficient funds in your bank account. That's why cheques might bounce but drafts guarantee secure and timely payment. DDs are payable on demand that's why are called Demand Drafts.

Notably, it cannot be paid to the bearer but the beneficiary has to present the instrument directly to the branch. It can also be collected through the clearing mechanism of the bank.

DD stands for Demand Draft. Demand Draft is one of the financial instruments that is used to make payments easier. Sometimes Demand Draft and Cheque are taken as similar things however there are a variety of facts that makes them apart. Unlike cheques, DD is a prepaid instrument means DD is issued after taking the amount that’s why it is a secure way to get payments also which is a major drawback in the case of a cheque where cheque bouncing is a common issue in everyone’s life.