A demand draft is a payment method that allows a person to move money from one bank account to another. Demand draughts, unlike conventional checks, do not require signatures to be cashed.
The Federal Reserve suggested additional restrictions in 2005 in response to an increase in the fraudulent use of demand drafts, enhancing a victim’s entitlement to a refund and holding banks more liable for cashing fake checks.
Understanding Demand Draft
When a bank creates a demand draft, the draught amount is deducted from the account of the customer who requested the draught and transferred to another bank. The drawer is the individual who requests the demand draft; the drawee is the bank that pays the money; and the payee is the person who receives the money. Click Here to know about flipkart seller
Demand drafts were created to help legitimate telemarketers withdraw payments from their customers’ checking accounts by using their bank account information and routing codes.
How a Demand Draft Works
The draft facility is open to anyone, regardless of whether or not they have a bank account. A demand draft can be issued by anyone who wants to pay a certain sum to an institution or to someone with proof of payment. Individuals can request a draught form from their bank or fill out the form online.
The sum specified on the form can be paid in cash or by check.
Types of Demand Draft
- Sight Demand Draft: This sort of DD is accepted and paid only after specific documents have been verified. If the payee fails to submit any of the needed documentation, he or she will not be allowed to collect any funds
- A Time Demand Draft is payable only after a certain length of time has passed, and it cannot be drawn from the bank before then.
How to Cancel A Demand Draft
- You Paid in Cash: To receive a refund, you must send the original draft to the bank along with the receipt. The bank would remove between Rs. 100 and Rs. 150 from your account
- If you paid by cheque and the amount was withdrawn from your bank account, you must send the original draft along with a correctly completed cancellation form, and the money will be credited back to your account with a Rs. 150 deduction.
What to Do if Demand Draft is Expired
The validity of a draft is three months from the date of issue. If the draft is not given to the bank within that time frame, it will expire. Despite the fact that the money has expired, it will not be reimbursed to the drawer’s account.
The drawer must then go to the bank to have the draft revalidated. One thing to keep in mind is that the payee or anybody else cannot visit the bank to revalidate the DD under any circumstances.
Before revalidating the draft and extending its usage for another three months, the bank verifies the original details. A revalidated draught, on the other hand, cannot be revalidated again.
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