A demand draft (DD) is a pre-paid negotiable instrument issued by a bank directing another bank to pay a specified sum to a payee. When issuing a DD, the bank deducts the amount from the requester's account. DDs can be made out in cash under Rs. 50,000 or by cheque for higher amounts. DDs must quote a PAN for amounts over Rs. 50,000. Banks charge variable fees of Rs. 1.5 to Rs. 4 per thousand for DDs. DDs are valid for 3 months and if crossed as "account payee" can only be deposited, not cashed. A pay order is similar to a DD but is "not negotiable" and

1. Pay Order &
Demand Draft
Presented By:
Chinar Sehrawat

2. DEMAND DRAFTS
• Demand draft (also known as DD) is a pre paid
negotiable instrument, wherein the bank by whom
the demand draft has been made undertakes the
responsibility to make full payment whenever the
instrument is presented for payment , the
beneficiary either has to deposit the same in his
bank account or get the same collected through the
branch who has made the DD.
• A bank issues a demand draft to a client (drawer),
directing another bank (drawee) or one of its own
branches to pay a certain sum to the specified party
(payee).

3. Contd.
• While making a demand draft, the bank deducts the
amount from the bank account of the individual who
has requested for making demand draft and deposits
the same in their own account. And when the DD is
presented for clearing, it is the responsibility of the
banker to make the payment.
• It is not mandatory that you should a bank account in
the bank from where you are preparing the demand
drafts. The demand draft can be made by paying the
bank in cash as well, but for demand drafts
exceeding Rs. 50000 the payment should be by
cheque only.

4. Contd.
• Quoting your PAN No. is also necessary in case the
value of DD exceeds more than Rs. 50000.
• A draft is normally prepared in Indian currency i.e.
rupees.
• However, in case you are required to make the
payment in foreign currency , a draft can be prepared
in foreign currency as well. Demand draft is an easy
way of sending payments abroad as the risk of non
clearance of a demand draft is nil.

5. Crossed Demand Draft
• In case the demand draft is crossed as accounts
payee, it cannot be encashed over the counter from
the bank branch and can only be cleared by
depositing in the bank account of the person in
whose favor the DD has been made.
• The main purpose of crossing a demand draft is to
ensure that the payment is cleared by means of an
account i.e. the payment is deposited in the bank
account of the person in whose favor the DD has
been drawn.

6. Contd.
• If the DD is not crossed, the payment would be made
by the bank to the holder of the Instrument after his
proper identification. And in case, it is a crossed
demand draft, the payment would be made only to
the Bank Account of the person.
• RBI in its Notification dated 4th November 2011 has
announced that all DD’s exceeding Rs 20,000
mandatorily have to be Crossed.

7. Demand Draft Charges
• There are no standard charges for making a DD and
the Charges usually vary from Bank to Bank and also
vary with the value of the Demand Draft.
• The Demand Draft Charges are variable and vary
with the value of the Draft. Banks usually charge a
variable fee Rs. 1.5 to Rs. 4 per thousand plus Service
Tax. However, if the value of Draft is small, they may
charge flat fixed charges as well. The charges may be
lower in case of Privilege Banking Customers.

8. Contd.
• In case the Individual on whose request the Demand
Draft had been drawn wants to cancel the Draft, he
can submit a request for the same along with the
Demand Draft to the banker from whom the Draft
had been made and the Bank would cancel the DD
and pay you the amount of the DD. The Draft
Cancellation Charges are usually Rs. 100 to Rs. 300

9. Contents of DD
1. 01/09/2007:Date on which the DD has been drawn. Prior
to 1st April 2012, a draft was valid for 6 months but w.e.f.
1st April 2012, the Validity of DD has been reduced to 3
Months.
2. PIO Ministry of Home Affairs: Name of the Person in
whose favour the DD has been drawn

10. 3. New Delhi: Place at which the DD is payable
4. Rs. 10: Amount payable through this DD
5. ICICI Bank, Connaught Place: Name of the Drawee
Bank and Branch
6. The Authorised Signatory of the Bank Branch from
where the DD has been prepared
7. 367217:DD Number of the Instrument
8. 000229000:MICR Code of the Bank Branch

11. Difference Between Cheque and
Demand Draft
• A Cheque is signed by an Individual and therefore
there are chances that the cheque may or may not
clear. However, a DD is prepared by the Banker and
as it is signed by a banker, the chances of default are
not there.
• Demand drafts can only be made payable to a
specified party, also known as pay to order. But,
cheques can also be made payable to the bearer.
• Demand drafts are orders of payment by a bank to
another bank, whereas cheques are orders of
payment from an account holder to the bank.

12. Pay Order

13. Definition
• 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.

14. 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.

15. Specimen of a Pay Order

16. THANK YOU