The Demand Draft, or a DD, is a negotiable instrument like a cheque which is used for transferring payments between two bank accounts. In India particularly, DDs are very popular among common people, perhaps as they are a more secure method of cashing cheques. However, there is a certain amount of expense that is incurred while making a DD from any bank. This is what we call the demand draft fees or the demand draft charges. Let us look at it in detail.
It may seem that making a DD is easy, it definitely is for a certain extent and for some people but, a bank costs a fair amount of time and therefore, people in the process. Hence, a DD becomes costly for the bank. To recover from this expense, the bank charges some demand draft fees. This fee increases with the amount of the DD. It also varies from one bank to another. But, there is also a float that is earned by the bank on the demand draft.
To understand what a float actually means, let us take a certain example. I deposit 1,00,000 rupees in a bank as a DD to be mailed to a friend. She encashes the DD after four-five days. During this time, the 1 lac rupees remain with the bank which earns an over-night interest on it. This income is the float and it goes on increasing until the DD is cashed by the beneficiary. However, this sum of money is significant only when the amount of the DD is huge and it is not cashed on the same day. This is not very common because demand drafts are received very quickly these days.
There are many different banks in India and all of them charge different rates for the demand draft fees. When you have to make a DD of a big sum of money, it is better to spend some effort looking for cheap demand draft charges. This expense is generally categorized into some amount ranges.
For DDs uptill Rs. 10000, the HDFC and the ICICI banks charge Rs. 50 while the SBI charges Rs. 30 (sometimes more). The demand draft fee between Rs. 10001 and Rs. 50000 is Rs. 2.50 per thousand for HDFC and SBI while it is Rs. 3 for ICICI bank. Above 50000, HDFC charges Rs. 2 per thousand. However, according to the info available on the net recently, a DD of more than 1 lac does not cost any fee in HDFC and ICICI banks.
Yet, there are certain terms and conditions for these rates and they are subject to change. Therefore, they must be confirmed with the respective banks.