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Demand Draft

Last Updated On -25 Feb 2025

Demand drafts have been a widely trusted and secure way of transactions in the world of finances. Where online transactions and instant money transfers have become day-to-day activities. However, demand drafts have been a traditional transaction method widely used for the trust and security they offer.

Demand Draft offers a risk-free payment gateway, from government and business transactions to educational fee payments.

What is a Demand Draft?

A demand draft is a financial instrument that is prepaid and is issued by the bank on behalf of the customer. This enables the payee mentioned in the draft to withdraw the designated amount from another bank branch or a different bank as directed by the demand draft. They are distinct from checks because they provide a guarantee and are prepaid by the bank, eliminating the risk of bouncing due to insufficient funds.

It is a negotiable instrument and is similar to the bill of exchange.

How to Issue the Demand Draft Online and Offline?

From issuing the DD (demand draft) to presenting it to the bank, the procedure to use the demand draft is simple and hassle-free.

The following states the procedure to issue the demand draft offline:

The applicant visits the bank and requests the demand draft
The bank will provide the application form with details about the payee’s name, amount, and bank branch name.
The bank thereafter collects the stated amount in cash or check or deducts it directly from the respective account.
The bank issues the demand draft in favor of the payee mentioned.
The payee can present the DD at the specified bank to receive the payment.
After the DD is verified, the bank can credit the amount in cash or directly to the account.
The DD can be canceled before encashment, subject to the bank charges.
The DD typically expires after 3 months, and the applicant can request revalidation from the issuing bank.

The following are the steps to issue the demand draft online:

Log in to the Internet banking portal
Look for options like “payment/transfer” or “sevices” section
Select “issue demand draft” option
Enter all the DD details
Choose the delivery method: collect at the branch or by courier service.
Confirm the transaction.

What are the Charges for Issuing and Canceling the Demand Draft?

Different banks charge different charges for issuing and canceling the demand drafts based on the amount and mode of issuance.

Here is a summary of the Demand drafts from some of the central Indian banks:

State Bank of India

Issuance Charges:

Up to INR 5,000: INR 25
INR 5,000-10,000: INR 50
INR 10,000-100,000: INR 5 per 1,000 rs
INR 100,000: INR 4 per 1,000

Cancelation or Revalidation charge: INR 200 + GST

HDFC Bank

Issuance Charges:

Up to INR 10,000: INR 50
Above INR 10,000: INR 5 per 1,000 rs

Cancellation charge: INR 100

Revalidation charge: INR 60 for DDs up to 1,000

ICICI Bank

Issuance charge:

Up to INR 100,000: INR 5 per transaction
INR 100,000-200,000: INR 15 per transaction

Cancelation or revalidation charges: INR 100 per DD

Axis Bank

Issuance charge:

15 DDs are free per day; after that, INR 50 per DD

Cancellation charge: INR 75 per DD

Revalidation charge: INR 50 per DD

Key Advantages of the Demand Draft

A demand draft, despite its existence for a long time and the evolution of financial transactions, has a renowned reputation and is used by a long line of people. This is due to the secure and hassle-free usage.

The following are the key advantages of a demand draft:

Highly Secure
Appropriate for Large Payments
Widely used for Outstation Payments
Non-negotiable: Only the Payee can withdraw the amount

Frequently Asked Questions (FAQs)

What is the validity of a demand draft?

A demand draft is typically valid for three months from the date it has been issued. To revalidate the expired DD, the purchaser can request it from the bank. However, a revalidated DD cannot be revalidated again.

Can we cancel or stop a demand draft?

Yes, a demand draft can be canceled without being encashed. The issuer can visit the bank with the original DD and submit the cancellation request. The bank will charge a fee for this. However, an encashed DD cannot be stopped or canceled.