Bank Cheque Vs Demand Draft: When it comes to cashless transaction, there is definitely a mention of check and demand draft (DD). Checks are used on a large scale, but people make DD a medium of transaction only for certain tasks. Bank checks and DD may look somewhat similar in view, but there is a slight difference in the way of both use and transaction. Also, one of these is considered more secure than the other.
Like checks, DD is also used to send money to a bank account. Demand drafts can be made by going to any bank. The special thing related to this is that to create a DD, it is not necessary to have an account in the bank. The money is directly transferred to the account of the person or company in whose name you are making the DD. The one who makes a DD can either get it made by giving cash or he can get the money deducted from his account if it is made from a bank with the presence of his account.
Major differences between checks and DD
- DD is only on the account. In whose name it is made, he can have it encashed from his account. At the same time, the check can be issued to deposit money in the account or to be directly incurred by the bearer without depositing the money.
- If there is not enough money in the bank account, the check bounces. But there is no problem of DD being bounced because the person who made DD for this has already paid.
- The check can be issued only by those who have an account with the bank but it is not necessary to have an account with the bank to create a DD.
- Sometimes it takes several days to transfer funds from standard checks. At the same time, it takes only one working day for the DD amount to reach the targeted account.
DD is considered more secure
If the check account is not paid and it is lost, then there is a chance of it being misused. Anyone can become a bearer and have it encashed. But this is not the case with DD. Through this, payment is made only in the bank account, so if it is lost, it cannot be encashed. Yes, it can be canceled in case of loss. According to the Reserve Bank’s rule, it is mandatory for the buyer’s name to be printed on the DD. This rule came into effect from 15 September 2018 so that money laundering attempts can be thwarted.
In whose name the DD is payable, he will have to explain the reason for the DD to be created for the DD to be encounted from the bank account. That is, for which work, the documents related to the amount being transferred from DD will have to be shown in the bank. Only then DD will be inked.
DD is of great use in these works
Bank DD is a good medium for large and international transactions. For most educational institutions and many jobs, DD is used as a fee transfer medium. DD can be made in any currency of the world if needed other than rupees.