BANKING AFFAIRS

Detailed explanation-1: -Demand Draft also called DD is a way to initiate transactions from one bank to another. It is a negotiable instrument that guarantees payment of a specific amount of money to the specified payee. Demand draft is only issued by the bank and one cannot issue a DD on an individual level.

Detailed explanation-2: -(1) A “negotiable instrument” means a promissory note, bill of exchange or cheque payable either to order or to bearer.

Detailed explanation-3: -A bank draft is a negotiable instrument where payment is guaranteed by the issuing bank. Banks verify and withdraw funds from the requester’s account and deposit them into an internal account to cover the amount of the draft.

Detailed explanation-4: -A demand draft (DD) is a negotiable instrument similar to a bill of exchange. A bank issues a demand draft to a client (drawer), directing another bank (drawee) or one of its own branches to pay a certain sum to the specified party (payee).

Detailed explanation-5: -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.