A Demand Draft (DD) is a form of payment that is drawn by your bank. You must raise a request with your bank for them to initiate the process. The bank will then process it and make the DD to the payee on your behalf.
Demand Draft is a secure payment method issued by a bank. It functions as a prepaid check, guaranteeing payment to the recipient upon presentation. It’s widely used for transactions where cash or personal checks might not be secure, providing a reliable and traceable means of transferring funds
The payee meaning refers to the person who is the recipient of the funds. Understanding the features and process of a DD can help make large payments. Keep reading to learn more.
Features of Demand Draft
· The amount to be paid in a DD is prepaid. The individual who asks their bank to raise must already have or provide the funds required in advance. Hence, there is no risk of bounce, whereas a cheque might.
· DDs are not like regular checks because they do not require the individual’s signature.
· In the business world, businesses use demand drafts to purchase items or products from another company.
· The buyer of the DD does not have to be a bank customer. If the DD is not delivered, the money is returned.
· The individual requesting the demand draft is the drawer. The bank making the payment is the drawee, and the person getting the money is the payee.
Benefits of a Request Draft
· A DD payment is guaranteed by the bank. It means that individuals who complete the requirements do not have to worry about the transaction failing.
· To make a DD payment, you don’t need too many details of the payee. This can be handy for getting payments done conveniently.
· Larger transfers of funds are more convenient to make. There is no limit to the amount that can be transferred on a DD. Hence, These are often used for large expenditures such as paying for schooling, paying medical bills, and purchasing a home or automobile.
Risks Of Demand Draft
Since a DD is a prepaid instrument that does not require a signature, you cannot stop payment on it. This means any mistake on the draft can result in the funds being transferred to the wrong person. As a result, it can be used to defraud people. There have been many instances of this being the case. Regulations have now been put in place to enable victims to get their money back from the bank.
Another risk is that the bank that issued the DD shuts down before the money is deposited and cleared. Drawees must deposit the DD amount on time, or run the risk of having it turn invalid. These risks that come with using this payment mode mean that individuals must always be careful when raising one.
Details Needed for Demand Draft:
· The drawer’s name and address (your name)
· The drawee’s name
· Payee’s name and address
· The city’s name where the DD is due
· Amount owed to the recipient (in words)
· The sum owed to the drawee (in numbers)
· Exchange (bank transaction cost)
· Total amount (in numbers) that the drawer owes the bank
· The drawer’s signature
· The drawer’s address and name
The drawer might be referred to as the “applicant” in the draft form. Once your DD has been signed and stamped by a bank official, you will receive a unique demand draft number which you should always store safely.
Raising Demand Draft
Thanks to digitization, you can raise a request for a DD with your bank through online methods. Head over to your bank’s website and log in. There, you will find a “Request and Enquiries” page that you can click on. Select the “Issue Demand Draft” option and select the account you want to use for the transaction. You then have to fill in the information necessary to complete the form. Finally, select the bank branch that needs to issue the DD on your behalf.
To make an online application, go to the bank branch closest to you. Ask for a DD form from a staff member. Complete all the necessary fields and submit it to the bank.
CONCLUSION
A Demand Draft is still a useful mode of payment for individuals and businesses who need to make large financial payments. However, there are some risks involved that individuals should be aware of to make sure they get it right.
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