January 16, 2017

Banking Awareness for IBPS PO & Clerk exams - Demand Draft

Banking Awareness for IBPS, SBI, RBI, LIC, IPPB Mains exams and Interviews

Demand Draft

Demand draft is a method of payment transfer from one bank account to another. They do not require signature to cash unlike the Cheques. It is a prepaid negotiable instrument. The responsibility to make full payment of the instrument is undertaken by the issuing bank. It is not mandatory to have a bank account in the bank where the demand draft is to be made.

If the amount in the demand draft exceeds Rs. 50,000, the payment should be made in cheque only. If the value of the demand draft is more than Rs. 50,000, providing the PAN number is mandatory. When a bank prepares a demand draft, the amount of the demand draft is taken from the account of the individual demanding demand draft or the customer can pay directly in cash.

The three persons involved in making and clearing the demand drat are The Drawer, The Drawee and The Payee. 

The person who requests the demand draft is the Drawer. The bank that is paying the money is the Drawee. The individual or the company receiving the money is the Payee.

Demand Draft is an easy way of sending money abroad. Because the risk of non clearance of the demand draft is zero.

Crossed Demand Draft

Banking Awareness for IBPS PO, Clerk mains, SBI, RBI Assistant IPPB Exams

If a demand draft is crossed, it is called Crossed Demand Draft. A crossed DD means, the payment has been deposited in the bank account on whose favour the demand draft is drawn. Crossing a demand draft prevents wrong payments and it also makes sure the correct person receives the payment. RBI in November 2011 announced that all demand drafts exceeding Rs. 20,000 should be crossed, and it is a mandatory.


The charge on making a demand draft is not standard. It varies from bankto bank. The charge on issuing a Demand draft also changes with the changing value or amount of the Demand Draft.

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