WAS
5 The bank informed that the cheque received from
returned unpaid by his banker. The banker levied a service charge of Rs. 20.
5 Mr. A received a bank demand draft of Rs. 2,900 from Gamma & Co.
towards the full and final settlement of the amount due from them.
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demand draft or a DD is a negotiable instrument issued by the bank. The meaning of negotiable instrument is that it guarantees a certain amount of payment mentioning the name of the payee. It cannot be transferred to another person in any situation.
The bank issues the draft to a client (drawer) directing another bank or own branch to pay the specific amount to the payee
Demand drafts can be compared to cheques but these are hard to counterfeit and more secure. This is because the drawer has to pay before issuing a demand draft to the bank whereas cheque can be issued without ensuring the sufficient funds in your bank account. Therefore, cheques can bounce but drafts assure a safe and on-time payment
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