When receiving and transferring funds from one customer’s account to another or from one bank account to another, most Indian banks rely on a variety of negotiable documents such as cheques and bills of exchange. An example of such an instrument is the Demand Draft, which is widely used in our country’s banking system.
Each negotiable instrument has a set time of validity within which it must be encashed in order to be considered legitimate. Let’s take a closer look at the idea of a Demand Draft and how long it is valid.
What exactly is a Demand Draft ?
A Demand Draft is a financial instrument that must be paid in advance. Transferring money from one bank account to another is a technique through which a person transfers funds from one bank account to another. This specific financial instrument varies from a traditional check in that it does not require the exchange of signatures in order for the funds to be released.
It is the drawer’s (a bank’s customer) responsibility to instruct the issuing bank (either another branch of the same bank or a different bank) to pay the amount specified in a Demand Draft to the person who submits the Demand Draft at the cashier’s counter.
This negotiable instrument’s distinguishing characteristic is that it is difficult to forge, making it a reliable source of funds transfer. Because the DD is issued by the bank only after the money has been paid to the bank, it will not bounce in the same way that a check would.
What is the procedure for issuing a Demand Draft (DD)?
The procedures listed below must be followed in order to get a Demand Draft from a financial institution.
- To begin, go to the financial institution where you have a savings account.
- Now, ask the bank teller to provide you with a demand draft form so that you may complete in all of the necessary information.
- Continue with the process by accurately filling out the demand draft form with all of the necessary information.
- Now take the completed paperwork to the teller, along with the check.
- The bank officials will review all of the information, and once they have verified it, you will be required to pay the DD fees associated with producing the demand draft.
- Later, the DD will be stamped by the appropriate bank officials, and the document will be given over to you for your records.
Demand Draft fees and charges ?
The Reserve Bank of India, the country’s central bank, has recommended banks to charge clients just a minimum fee for the service of demand draughts. Demand Drafts are not subject to any specific fees or levies imposed by the central bank. Demand Draft are issued to clients by every bank in India, and each bank has its own fee structure.
In certain instances, the interest rate changes across banks depending on the priority points a particular client has earned.
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How long does it take for a Demand Draft to be cleared for publication ?
The time it takes for a Demand Draft to be cleared differs from one bank to another in most cases. In most cases, it is cleared within half an hour of the instrument being presented to the bank, or by the end of the business day in the most extreme cases.
In some instances, it may take up to two or three working days for a DD to be processed by the bank.
If the amount of the DD is significant, it will only be credited to the client’s bank account and will not be made available in cash to the customer.
The period during which the Demand Draft is Valid ?
It is quite common to observe individuals who are late in depositing their checks for credit into their bank account because they are busy. This delay may be caused by a variety of factors, but those who fall into this category should be informed that the Reserve Bank of India has implemented a new regulation that has shortened the life span of cheques and Demand Drafts..
According to RBI rules, starting on April 1, 2012, negotiable instruments such as Demand Drafts, cheques, banker’s cheques, pay orders, and other similar instruments would be valid for just three months. In the beginning, these instruments were only valid for 6 months from the date of issue.
The rationale for this modification was that there were individuals who were taking unfair advantage of the six-month validity period and were exchanging these instruments in the market like currency throughout this time period. This modification was made by the Reserve Bank of India in the benefit of the general public as well as the interests of banking policy.
Moreover, the RBI said that it was essential to shorten the length of time during which Drafts, Cheques, banker’s Cheques, Pay orders, and other similar instruments may be submitted for payment from six to three months from the day on which the instruments were issued.
Banks have been instructed not to make any payments if the instruments are submitted beyond three months from the date of issue, according to the Reserve Bank of India.
If the demand draft’s validity period has expired, the purchaser of the DD should visit the branch where the draft was issued and file an application for the revalidation of the demand draft, which will be processed by the branch.
The individual whose name appears on the draft will be unable to approach the bank to begin the revalidation procedure.
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