What Is A Bank Draft And What Are Its Characteristics?


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Nouman Umar answered
A bank draft is an order by the one branch of a bank to another branch of the same bank to pay a certain sum of money on demand to the person named therein. It is drawn by one branch to another branch of same bank. Drawer and drawee bank is the same but branches are different. The amount payable is specified in the draft. The person to whom amount is payable is also specified therein. It is payable on demand. It is an unconditional order for payment. It bears no stamp. It bears the signature of the authorized official capacity including his code number. There are many advantages of the bank draft. It is very useful instrument for settlement of debts. A debtor by purchasing a draft from a bank and sending it to the creditor can clear the debt owned by him. The baker's drafts are used for remitting funds abroad as well as within the country. A payment through baker's draft can be made by airmail transfer.

A draft is a very reliable and authenticated instrument of credit for remitting money. The settlement of payment by draft has greatly helped in the financing of domestic as well as foreign trade.

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