First you have to understood who is a Drawer,Drawee,Payee- Demand Draft(DD) is a cheque that contains an order of one branch of a bank (Drawer branch )
- directing another branch of the same bank ( Drawee branch ) to pay on demand a certain sum of money to a specified beneficiary ( Payee ) .
- It is an Account payee instrument, meaning it can only be credited to the account of the payee and cannot be encashed over the counter by the payee.
So in this case : Drawer branch- Bank of India, Mumbai
Drawee branch- Bank of India, Delhi
Payee -Delhi University
- The Drawer branch and Drawee Branch have to be of Same Branch. Like Bank of India, Mumbai will issue a Draft on behalf of Delhi University which can only draw in Bank of India, DELHI (No other bank). But in case: if Delhi University doesn't have an account at Bank of India but have an account at PNB then it can deposit the DRAFT at PNB and through CTS-2010 the PNB cleare it and give the money to DELHI UNIVERSITY.
- Pay Orders, also called Local DDs or Bankers' cheques, are cheques where the drawer and the drawee branch is the same. These are used for local payments (that is, payments within a city )
- Since it is a cheque issued by a bank (that is, drawer is a bank) it does not carry the signatures of the customer, unlike the case of ordinary cheques which carry the signature of the customer (who is the drawer). Instead, a DD & Pay Order carries signatures of one or two bank officials, depending on the DD & Pay Order amount. Usually the DD & Pay Order will carry the name/code of the Drawee branch and of the Issuing (Drawer) branch both. The placements of this varies from bank to bank.
- Since a DD & Pay Order is kind of a cheque, the principle of Cheque Clearing also applies to DDs & Pay Orders.
- Validity Period of DD is 90 days from the date of issue on effect from April,2012.
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