Every Indian Bank provides its customers with a demand draft and cheque facility to ensure hassle-free transactions, flexibility, and a simple banking experience. As we know, cheque and Demand Draft are two different instruments, and so are their uses, features, and benefits. In this article, we will be discussing the difference between the two.
What is a Cheque?
A Cheque is a bill of exchange where one party orders the bank to transfer the money to the bank account of another party. Cheques are covered under the Negotiable Instruments Act, 1881. Three parties are involved in a cheque transaction i.e. the Drawer – who writes the cheque, the drawee – the bank that has to transfer the funds and the payee – the person in whose name the cheque has been issued. A cheque can be issued against either a savings or a current account.
Key Features of a Cheque
- Drawer: A person who writes the cheque and holds the bank account from where the funds will be withdrawn is known as a “Drawer”.
- Payee: An individual, organization, or entity to whom the payment is being made. His/ Her name is usually written on the cheque.
- Amount: The amount of money specified on the cheque that has to be paid.
- Date: The date on which the cheque is issued has to be mentioned. This date is significant for knowing the cheque’s validity and the timing of the payment.
- Signature: The drawer is required to sign a cheque to authenticate and authorize the payment. The signature must be in line with the bank records.
- Bank Details: The cheque includes the details of the bank and a branch where the drawer holds the account. With the help of these details only, the bank will be able to identify the bank account from which the payment is to be debited.
- Crossing: A cheque can be crossed by drawing two parallel lines across the top left corner. This signifies that the cheque must be deposited into a bank account and cannot be encashed directly.
- Bouncing: The cheque may be returned unpaid, in case there are insufficient funds in the bank account. This is known as a case of “Bounced Cheque” or “Dishonored Cheque”. To avoid this situation, an account holder can get the Axis Bank Passbook updated to track the transaction along with the account balance. Hence, before getting the cheque submitted to the bank, one can get his/her passbook updated.
Types of Cheques
Mentioned below are the different types of the cheques:
- Bearer Cheque – Payable to the person who presents it; does not require endorsement.
- Order Cheque – Payable only to the person or organization named on the cheque; requires proper endorsement.
- Crossed Cheque: Contains two parallel lines across the top left corner, indicating it must be deposited into a bank account, not cashed over the counter.
- Open Cheque: A cheque that is not crossed, can be encashed by anyone presenting it at the bank.
- Post Dated Cheque: A cheque with a future date, cannot be cashed until that date arrives.
- Stale Cheque: A cheque presented for payment after a certain period (usually 6 months) from the date of issue.
- Self-Cheque: A cheque made payable to oneself, often used for withdrawing money from one’s account.
- Traveler’s Cheque: Preprinted cheques used for travel, can be replaced if lost or stolen.
- Certified Cheque: Issued by a bank with a guarantee of sufficient funds, often used for large transactions.
- Banker’s Cheque: Issued by a bank, drawn on its funds, used for secure payments, also known as a cashier’s cheque.
- Gift Cheque: Used as a gift, can be exchanged for goods or services at specific merchants.
- Cancelled Cheque: A cheque that has been marked as cancelled and is often used for verification of account details.
What is a Demand Draft?
It is a pre-paid negotiable instrument issued by the bank or a financial institution to make payments. They are considered to be the secure and reliable modes of funds transfer, especially for larger amounts or where a high level of certainty is required in the payment process.
The drawer is the person requesting the demand draft, the bank paying the money is the drawee and the party receiving the money is the payee. Here, the bank (drawee) issues a demand draft to a client (drawer) to pay the specified amount of money to the specified person (payee).
Key Features of Axis Bank Demand Draft:
Mentioned below are the key features of the Axis Bank Demand Draft:
- Prepayment: The issuer collects the entire draft amount ensuring the availability of the funds before issuance of the draft.
- Payee Specification: It specifies the name of the payee and is usually made payable to a specific individual, organization, or entity.
- Crossed Format: DD are crossed i.e. they can be deposited into a bank account and cannot be directly encashed.
- Secure Payment: As the funds are already collected by the issuing bank, reducing the risk of dishonored payments due to insufficient funds, they are considered to be secure.
- Validity: There is a Demand Draft Validity of 3 months after which they may be subject to additional processing or revalidation.
- Usage: They can be used for making educational fee payments, purchasing property, settling bills, or conducting business transactions.
- International Transactions: DDs can be used for cross-border payments, acting as a secure way to remit funds to different countries.
Types of Axis Bank Demand Draft
Mentioned below are the types of Axis Bank Demand Drafts:
- Sight Demand Draft:
The Sight Demand Drafts are considered to be payable when some documents are presented. In case the receiver is not able to provide the documents specified, then he/she will not be getting money out of the demand draft.
- Time Demand Draft:
Time Demand Draft is billed exactly at a specified time i.e. before the specified time, the DD cannot be billed from the bank.
Axis Bank Demand Draft Details
Mentioned below are the different items that an Axis Bank Demand Draft contains:
|Items in DD||Field Details|
|Bank Branch||The branch of the bank issuing the DD|
|To Pay||Details of the Payee|
|Date||Date of issue of DD (valid period is three months from this date)|
|Amount (in words)||The amount payable to the drawee in figures|
|DD number||A unique number is assigned to the DD|
|Signature||Signatures of the officers of the bank branch issuing DD|