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CHAPTER IX
Demand Draft

Demand Drafts
Bank Draft is an order to pay money, drawn by one office of a bank upon another office of
the same bank (vide section 85 A of Negotiable Instruments Act).
Issue of Demand Drafts
Banks normally instructs that on Demand Drafts of above Rs.20,000/-.shall be signed by
two officers. In branches with single officer the officer shall affix two signatures with his
name and signing power number on Demand Drafts of above Rs.20,000/-.
When Demand drafts of above Rs.20,000/- are to be issued by a single officer in branches
having more than one officer, sequel to leave of the other officers, the concerned officer shall
affix two signatures with his name and signing power number. In this connection the drawer
branch shall send intimation through E-mail to the drawee branch on the same day.
Banks should ensure that demand drafts of Rs 20,000/- and above are issued invariably with
account payee crossing.
A Bank Draft is stale, on expiry of 3 months from the date of issue. Stale drafts, if presented
for payment shall not be honoured. They have to be revalidated..
Banks have to issue drafts of small amounts against cash to all customers irrespective of the
fact whether they are having accounts with the banks or not.
Encashment of drafts
The banks should ensure that drafts drawn on their branches are paid immediately.
Payment of draft should not be refused for the only reason that relative advice has not been
received.
Issue of Duplicate Demand Draft
Duplicate draft, in lieu of lost draft, up to and including Rs5,000/- may be issued to the
purchaser on the basis of adequate indemnity and without insistence on seeking non-payment
advice from drawee office irrespective of the legal position obtaining in this regard.
Banks should issue duplicate Demand Draft to the customer within a fortnight from the
receipt of such request. If it is delayed beyond this period, banks will have to pay interest at
the rate applicable for fixed deposit of corresponding maturity in order to compensate the
customer for such delay.

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The period of fortnight prescribed would be applicable only in cases where the request for
duplicate demand draft is made by the purchaser or the beneficiary and would not be
applicable in the case of draft endorsed to third parties.
STOP PAYMENT OF DRAFTS
It is not possible to stop payment of a demand draft for the following reasons:
The draft represents banks own commitment in favour of a third person, the payee, at
the instance of the purchaser.
The payee accepts the draft not because of the credit of the person delivering it, but
because of the credit of and faith in the bank issuing it. Stopping payment of a draft at
the instance of the purchaser would upset many commercial transactions. It will also
endanger publics confidence in banks.
If the draft has been negotiated to a holder in due course, he can also enforce payment
against the bank in its capacity as a drawer, so long as the draft is not marked not
negotiable.
Drafts Reported Lost.
On receipt of report from the payee or purchaser regarding loss of instrument the issuing
branch shall enter the details of the demand draft in the system/DD Caution Register,
simultaneously making a note of the loss of the DD in the system/DD issued register
maintained in the system and also inform the drawee branch about the loss of DD and advise
them to exercise caution. Such drafts when presented for payment across the counter the
drawee branch should pay it only on proper identification to their satisfaction. If the branch is
not satisfied the draft should be returned with objection draft reported to have been lost.
Payees endorsement requires verification. Even when drafts are presented for payment
through clearing the position remains the same. The branch should pay only if it is satisfied
both regarding identity and title of the claimant. If not satisfied regarding identity and title the
draft may be returned with the objection draft reported to have been lost; payees
endorsement requires verification, will pay on collecting banks guarantee.
Even though the purchaser cannot stop payment of the draft as such, on receipt of information
from the purchaser regarding loss of the draft and on subsequent presentation for payment the
Bank has to act as if it is received from the payee.
Where the payee or the purchaser satisfies the issuing branch, that the draft has been lost or
stolen before it was endorsed by any one, and the loss has been reported to the branch
accordingly, the branch should not pay such a draft if it is presented for payment with any
endorsement. Such an endorsement on it would be a forgery and no one can be a holder under
a forged endorsement. If the demand draft is presented bearing an endorsement purporting to
be that of the payee or of any holder it should be returned with the reason Draft reported to
have been lost; payees endorsement requires verification.
The amount relating to a lost instrument can be refunded to the purchaser only by issuing a
duplicate demand draft after complying with the formalities.

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CANCELLATION OF DEMAND DRAFTS
The issuing Bank may cancel a demand draft only on the request of the purchaser and repay
the amount to him, on production of the demand draft intact, provided that,
1) it is presented duly discharged under the words Received Payment by Cancellation.
When cash is paid the discharge shall be across a revenue stamp. The purchasers
signature should be verified with the signature on the application form.
2) the demand draft is in the name of the purchaser, and that a letter stating that the
demand draft is no longer required, is taken.
3) the endorsements, if any, on the demand draft are marked Cancelled under the
endorsers signature.
4) if the payee of the demand draft is a different person, his consent is taken.
5) no duplicate demand draft has been issued on a prior date.
Banks may at their discretion waive compliance of clause no (5) in cases where they feel that
obtention of consent letter from payee is difficult.
The cancelled demand draft shall be marked or stamped as Cancelled under authentication.
The signatures of the officials, appearing on the cancelled draft must be scored through.
Cancellation of the draft should be noted, against the serial number, in the system.
The cancelled draft and counterfoil should be kept along with the days vouchers, after
tearing off the signature portion of the Draft.
In the case of cancellation of draft at the time of preparation itself due to wrong entry of
figures, name, date etc. cancellation should be noted against the serial number of the draft in
the system.
Special features of Demand Draft
(1) Once issued, payment of a demand draft cannot ordinarily be stopped.
(2) A demand draft cannot be made payable to bearer.
(3) In the case of a lost demand draft issue of duplicate only is permitted and not refund.