What is Demand Draft?

Created by Swathi acc admin, Modified on Thu, 9 Oct at 12:28 PM by Swathi acc admin

A Demand Draft (DD) is a secure method of payment that guarantees funds to the recipient because the payment is made by the bank itself, not directly from an individual's account balance.

Here is a simple breakdown:

Key Characteristics of a Demand Draft

Feature	Explanation
Issuer	Issued by a bank (on behalf of a customer).
Payment Status	It is a prepaid instrument. The money is debited from the customer's account (or paid in cash) when the DD is issued.
Guarantee	Payment is guaranteed by the issuing bank. The DD cannot "bounce" due to insufficient funds, unlike a personal cheque.
Payable To	It is made payable to a specific individual or entity (the payee) mentioned on the draft.
Validity	Typically valid for 3 months from the date of issue.