Definition of Bank Draft and pay order

1. Bank Draft

2. A bank draft is one kind of negotiable instrument. It is a written order
by one branch of bank to another branch of the same bank to pay
certain sum of money on demand to the person named.

3. Mr. Nil is looking to purchase a used car for
his son Mr. Ifti , as he recently turned 18
years old. He negotiated with Mr. Assad to
buy his 2014 Hyundai Accord. Since Mr. Assad
doesn’t know Mr. Nil, he doesn’t want to
take a risk that Mr. Nil’s personal check not
clear, so he requires Mr. Nil to pay with a
bank check. In order to settle the transaction,
Mr. Nil asked his bank to issue a bank draft
for $8,000 to pay Mr. Assad.
Example

5. Features of Bank Draft:
•It is conditional order for payment.
•It is drawn by one branch to another branch.
•The bank of the two branches will be same is
payable
on demand.
•It is payable on demand.
•The amount specified is written on it.
•The name of specified person is also written on it.
•It bearer signature of the issuing authority.
•Branch code number is also written on it.

6. •It is very useful for trade.
•It is useful for the settlement of debts.
•It is a reliable credit instrument for remitting
money.
•He payment of draft through telegraphic
transfer (T.T) is made with in a few hours.
Advantages
Of
Bank Draft

7. Pay order

8. Pay order is also called as banker’s cheque.
Pay order is a document which instruct a
bank on behalf of the customer to pay a
certain sum to a third party. Such orders are
normally acknowledged by the bank which
provides the guarantee that the payment
will be made.

10. Features of Pay Order
• Pay order are not dishonored
as amount is prepaid.
• Once issues, the Pay Order is
valid for 3 months.
• Pay Order are “Not
Negotiable” instrument.
• These are cleared in any
branch of bank in the same city.
• Preferred by schools and
colleges.

11. Bank Draft Pay order
A bank draft is one kind of negotiable instrument. It is a written
order by one branch of bank to another branch of the same
bank to pay certain sum of money on demand to the person
named.
Pay order is a document which instructs a bank
to pay a certain sum of a 3rd party.
Bank draft is a negotiable instrument Pay order is not a negotiable instrument
Bank draft has three parties drawer, payee, and
Drawee.
Pay order has two parties Drawer and Payee.
Bank draft is widely used both in inland and foreign
country
Pay order is used only in banks located under one clearing
house.
Bank draft can be cleared at any branch of the same bank Pay order to be cleared in any branch of the same bank
Difference between Bank draft and Pay order

12. AT H N K S
E V E R Y
T O
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