A Demand Draft is a much safer and certain method of payment than cheques, since in the case of cheques, an individual is the drawer and hence the cheque can be dishonored by the drawee bank due to insufficiency of funds in the drawer’s account. But since in the case of a DD, the drawer is a bank, payment is certain and it cannot be dishonored. This is also one of the oldest forms of remittance of funds.

Demand drafts are also known as sight drafts, as they are payable when presented by sight to the bank. Under UCC 3-104, a draft has been defined as a negotiable instrument in the form of an order. The person making the order is known as the drawer and the person specified in the order is called the drawee, as defined in the UCC 3-103. The party who creates the draft is called the maker, and the party who is ordered to pay is called the drawee

Apart from accepting deposits and lending money, Banks also carry out, on behalf of their customers the act of transfer of money. From one place to another. This activity is known as “remittance business”. Banks issue Demand Drafts. For transferring the money. Bank issues Demand Drafts on various places in India. A demand draft is more secure than a normal cheque as it can only be credited to a specific payee’s account, and a customer can only be reimbursed on request under indemnity if the draft is lost or stolen.