Demand Draft (DD): Definition, Uses, and How It Works

A Demand Draft (DD) is a prepaid, bank‑guaranteed negotiable instrument for transferring funds.

How It Works

1. Applicant deposits funds (cash or account debit) at issuing bank.
2. Bank issues DD payable to named payee, drawn on its own branch or correspondent bank.
3. Payee presents DD at drawee bank for payment.

Key Features

• Cannot bounce (funds already collected).
• Used for high‑value or cross‑city/cross‑border payments (real estate, tuition, trade).
• Valid for 3 months (re‑validatable).
• Small issuance fee.

DD vs. Check

Check: drawer's account debited on presentation; can bounce. DD: bank's obligation; safer for payee.