Question

Explain the process of obtaining a Demand draft?

Answer 1

The process of obtaining a Demand draft :

• An applicant for a Demand Draft is required to fill in a DD Request Slip, mentioning the amount, payee's name, issuing branch, location the draft should be payable at, his name, signature and account number etc. In most cases, the purchaser of the draft is an account holder with the bank, hence he can authorise the bank to debit (that is, take out funds from) his account either through a Cheque or a debit mandate. The Cheque should be drawn in favor of “Yourself for the issue of DD favoring XYZ ", where XYZ refers to the payee of the DD. The banker will debit the account of the account holder and issue a DD in favour of the beneficiary. The purchaser of the Demand Draft will send it to the beneficiary who will deposit the DD in his Bank account. Beneficiary’s Banker will clear the draft through the clearing process. On clearance, Beneficiary’s Bank will credit the Beneficiary’s account.
• The bank levies charges for issuing the DD, in the form of a commission. Hence the customer has to pay an amount equal to (DD amount + Commission + Service Tax).
• DDs can also be issued against the payment of cash by the purchaser, but in this case, the total amount (inclusive of commission and taxes) should not exceed Rs. 49,999. PAN number of the purchaser will be necessary if the amount of DD exceeds Rs.10,000/=.
• Since a DD is a kind of a cheque, the principle of Cheque Clearing also applies to DDs. In the example mentioned above, if the payee, does not have an account with SBI, but with another bank, say PNB, he would deposit the Draft in its PNB branch and the PNB officials would lodge the DD in outward clearing. (The DD would be sent to the local Clearing House).