Demand Draft Status

Overview

• Demand draft, also known as DD, is one of the payment instruments issued by banks, payable in full on demand. The negotiable instrument is issued by the bank to the customer, asking a bank or one of its branches to pay the specified amount.
• Considered as a secure mode of payment, the demand draft is known to be hard to forge or counterfeit as the customer (drawer) must pay the bank before the DD is issued. DDs are also known to be more reliable compared to regular cheques as they are payable on demand without the possibility of being dishonored due to insufficient funds.
• A demand draft is an assured method of receiving funds as it eliminates the fraud or counterfeiting part of the payment, especially in a business transaction when the drawer and the payee are not known to each other.

Demand Draft

• A demand draft or a DD is a negotiable instrument issued by the bank. The meaning of a negotiable instrument is that it guarantees a certain amount of payment mentioning the name of the payee. It cannot be transferred to another person in any situation.
• The bank issues the draft to a client (drawer) directing another bank or own branch to pay the specific amount to the payee
• Demand drafts can be compared to cheques but these are hard to counterfeit and more secure. This is because the drawer has to pay before issuing a demand draft to the bank whereas a cheque can be issued without ensuring sufficient funds in your bank account. Therefore, cheques can bounce but drafts assure a safe and on-time payment
• The drafts are payable on demand.  It cannot be paid to the bearer but the beneficiary has to present the instrument directly to the branch. It can also be collected by the clearing mechanism of the bank
• Mostly, demand draft status is issued in situations where the parties are unknown to each other and lack trust. It comes in handy in such situations as there are almost no chances of fraud and counterfeiting

Demand Draft Number

The DD number is a 6-digit numeric code or a serial number found at the bottom of the instrument, and next to it is the Magnetic Ink Character Recognition (MICR) code. The DD number is just like a cheque number, a unique code is used to complete each transaction.

Types of Demand Drafts

Demand drafts are of two types:-

• Sight Demand Draft: This type of DD is approved and paid only after the verification of certain documents. The payee will not be able to receive any money if he/she fails to present any of the required documents.

• Time Demand Draft: A Time DD is payable only after a specific period and before that, it cannot be drawn from the bank.

Why Do You Need to Know the DD Number?

The DD number is especially useful when the draft is stolen or lost. This can also be used to find out if the DD was encashed by the payee and helps in keeping records of your payments. It may be noted that banks have unique DD numbers to differentiate themselves from other banks.

What is a Demand Draft Fraud?

• Despite being one of the safest mediums of money transfer, demand draft fraud is a common practice. Misuse of digital information and easy availability of sophisticated equipment is also a possible reason for such crimes.
• A demand draft fraud is a scenario when someone issues a fake DD in the name of the payee. In such situations, it becomes harder to track down the person who issued the draft from the bank and the payee has to face legal hassles. In the case of presenting a fake DD to the bank, the bank can file an FIR in the name of the payee and he/she has to face the legal procedures.
• This might land someone in serious trouble and thus it is important to follow a set of simple rules to avoid and deal with such fraud.
  • Keep Proper Information of the Drawer: Always extract proper contact information of the drawer and do not forget to verify it. This is not a full-proof step but it will help you narrow down your area of search and track down the fraudster. Keep proper details of your conversation or deal with the drawer so that you always remain out of the circle of doubt.
  • Always Keep a Copy of the Draft: Make a colored photocopy of the draft and keep it safe along with demand draft status. This will help you identify the methods used in forging the draft especially in situations where the draft carries a significant amount with them.
  • Take Legal Action Immediately: Banks usually take legal action immediately against the payee when presented with a fake draft. This is because they are bound by rules and their actions are directed towards avoiding any mishap. Launch a counter FIR and take serious legal advice as you have to fight on three fronts now. One is to face the legal procedure, the second is to track down the fraudster and the third is to try and recover your loss. In addition, contacting the drawer branch is also a good idea as they can provide you vital information about the drawer such as CCTV footage, contact information, etc.

Demand Drafts Versus Checks

• A demand draft is issued by a bank while a check is issued by an individual. Also, a demand draft is drawn by an employee of a bank while a check is drawn by a customer of a bank. Payment of a demand draft may not be stopped by the drawer as it may with a check.
• Because a demand draft is a prepaid instrument, payment cannot be stopped, whereas payment of a check may be denied for insufficient funds.
• Although a check can be hand-delivered, this is not the case with a demand draft. The draft may be drawn regardless of whether an individual holds an account at the bank while a check may be written only by an account holder.

Conclusion

A demand draft is a way to initiate a bank transfer that does not require a signature, as is the case with a check. A demand draft is a prepaid instrument; therefore, you cannot stop payment on it in the case of fraud or mix the intended recipient. Because demand drafts can be used to defraud people, there are regulations now in place that allow victims to recover funds from the holding bank

Questions and Answers

How to Cancel a Demand Draft?

The amount you give to issue a draft is immediately accepted by the bank whether it is cash or cheque and you have to go to the bank to cancel a DD as there is no online provision for it. As per the payment methods, there may be two cases in which you have to cancel the DD.

• You Paid Through Cash: You have to submit the original draft along with the receipt to the bank to get the refund. The bank will deduct around Rs. 100 to Rs. 150.

• You Paid Through Cheque: If you paid the amount through cheque and the amount is deducted from your bank account, you need to submit the original draft with a duly filled cancellation form and the amount will be credited back to your account with a deduction of Rs. 150.

In any case, you might land in trouble if you have lost the DD or missed it in the postal service. This is because the bank will ask for proof of issuing the instrument. However, with some requests and cooperation from the bank, you may find a copy of the draft receipt in the bank and precede the cancellation.

How to Track the Status of Demand Drafts?

The validity of a demand draft is currently 3 months from the date of issue of the DD. If you want to track the status of the DD, visit your bank and find out if the DD was encashed or not. The process to check demand draft status online doesn't take much time as well.

How to Make Demand Drafts?

• The form for demand drafts can be collected from the bank or can be filled online. You need to input some important details such as your mode of paying for the draft (cheque or cash), the name of the beneficiary, the place of encashing the draft, cheque number, your bank account number, signature, etc. You would also have to provide your PAN card details if you are paying more than Rs. 50,000 by cheque.
• You are required to pay certain charges for the draft which are subject to the bank’s policies. The charges may vary but there always remains a certain criterion. Here is a list of charges levied by the popular banks of the country.