Difference Between Bankers Cheque and Demand Draft

When dealing with large amount of money or transactions that require guaranteed payment, you might come across terms like banker’s cheque and demand draft. Both are popular instruments used in banking for secure transactions, but they serve slightly different purposes and have distinct features.

Understanding difference between bankers cheque and demand draft can help you choose the right one for your needs. In this blog, we’ll explore what a banker’s cheque is, what a demand draft is, and the MAJOR difference between them in very straightforward language.

What is a Banker’s Cheque?

A banker’s cheque, also called cashier’s cheque, is a cheque issued by a bank. It guarantees payment because the bank itself is responsible for paying the amount written on the cheque. Here’s how it works:

  1. Issuance: You go to the bank and ask for a banker’s cheque.
  2. Payment: You pay the amount you want to be written on the cheque to the bank, either in cash or from your bank account.
  3. Guarantee: The bank then issues the cheque in the name of the person or organization you want to pay. Because the cheque is backed by the bank, it’s considered very safe. The recipient can be sure that the cheque will not bounce due to insufficient funds.

Banker’s cheques are often used for transactions where security is important, such as buying property or paying for large purchases.

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What is a Demand Draft?

A demand draft (DD) is another type of payment instrument issued by a bank. It is similar to a cheque but works a bit differently:

  1. Issuance: Like a banker’s cheque, you request a demand draft from your bank.
  2. Payment: You pay the bank the amount for the draft, including any applicable fees.
  3. Draft Issuance: The bank issues a draft in the name of the recipient. This draft instructs another branch of the same bank or a different bank to pay the specified amount to the recipient.

Demand drafts are often used for transactions that need to be sent over long distances, such as paying a fee for an educational institution in another city.

Key Difference Between Bankers Cheque and Demand Draft

Although banker’s cheques and demand drafts are similar in several ways, there are some major difference between them. Let’s look at these differences in detail:

Area of Use

  • Banker’s Cheque: Typically used for local transactions within the same city or nearby areas. It is often used when the payment needs to be guaranteed and immediate.
  • Demand Draft: Used for outstation transactions, meaning it is suitable for sending money to another city or state. Demand drafts are ideal when the recipient is far away.

Payment Guarantee

  • Banker’s Cheque: The payment is guaranteed by the issuing bank. Once the bank issues the cheque, it sets aside the amount from the customer’s account or takes the money in cash. This means the cheque will not bounce.
  • Demand Draft: The payment is also guaranteed by the bank. The amount is paid in advance, so there is no risk of the draft being dishonored due to insufficient funds.

Processing Time

  • Banker’s Cheque: Typically cleared faster because it is used within the same city or bank’s network. The processing time is usually shorter.
  • Demand Draft: Might take a little longer to clear, especially if it is sent to another city or bank. However, the process is still reliable and secure.

Issuance Process

  • Banker’s Cheque: Issued by the bank directly to the customer. The customer then hands it over to the recipient.
  • Demand Draft: Issued by one branch of a bank but can be payable at another branch or bank in a different location. The recipient can encash it at the specified branch.

Usage Scenarios

  • Banker’s Cheque: Commonly used for making payments that need immediate confirmation and within the same locality, like purchasing a vehicle, paying for property, or other significant local transactions.
  • Demand Draft: Often used for educational fees, sending money to a distant relative, or any situation where the recipient is located far from the sender.

Similarities Between Banker’s Cheque and Demand Draft

While there are differences, it’s also important to understand the similarities between banker’s cheques and demand drafts:

  1. Security: Both instruments are considered secure as they are backed by the bank, which ensures that the recipient gets the payment.
  2. Advance Payment: The amount to be paid is taken in advance by the bank, which guarantees the payment and avoids the risk of bouncing.
  3. Fees: Banks usually charge a amount for issuing both banker’s cheques and demand drafts. The fee is different from bank to bank and depends on the amount being transacted.
  4. Non-Negotiable: Both instruments are non-negotiable, meaning they cannot be endorsed to someone else. The payment will be made only to the person or entity whose name is on the cheque or draft.

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How to Get a Banker’s Cheque or Demand Draft

The process of getting a banker’s cheque or a demand draft is quite straightforward. Here’s a step-by-step guide:

  1. Visit Your Bank: Go to your bank branch where you hold an account.
  2. Fill the Form: Ask for the banker’s cheque or demand draft application form and fill it out with the necessary details.
  3. Payment: Pay the required amount along with any applicable fees. This can be done through your bank account or in cash.
  4. Issuance: The bank will issue the banker’s cheque or demand draft in the name of the recipient you have specified.

Advantages of Using Banker’s Cheque and Demand Draft

Both banker’s cheques and demand drafts offer several advantages:

  • Guaranteed Payment: Since the bank guarantees the payment, there is no risk of the cheque or draft bouncing.
  • Security: These instruments are secure as they reduce the risk of theft or loss compared to carrying large amounts of cash.
  • Acceptance: They are widely accepted by individuals, businesses, and institutions due to their reliability.

Disadvantages of Using Banker’s Cheque and Demand Draft

Despite their advantages, there are some disadvantages to be aware of:

  • Fees: Banks charge a fee for issuing these instruments, which can sometimes be high for large amounts.
  • Processing Time: While generally quick, there can be some delay in processing, especially for demand drafts sent to distant locations.
  • Non-Transferable: These instruments cannot be transferred or endorsed to another party, which can be a limitation in some cases.


Banker’s cheques and demand drafts are valuable tools in the banking world, providing a secure and reliable way to make payments. Understanding the differences between the two can help you choose the right one for your requirements. Whether you need to make a local payment with immediate confirmation or send money securely to a distant location, these instruments ensure that your transactions are smooth and worry-free. Always consult with your bank for specific details and fees related to these services to make the best choice for your financial transactions.

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