Question

Rajiv's daughter has secured a seat in a Law college. The college has asked for the payment of admission fee through the financial instrument payable on demand.

Identify and explain the financial instrument indicated above. Can it be issued online? List any two of its features.

Answer 1

The financial instrument indicated above is a "demand draft."

A demand draft is a bank-issued prepaid instrument used for secure payment. It transfers funds from one bank account to another, either domestically or internationally, according on the purchaser's request. Banks offer online and mobile banking tools for issuing demand drafts. Customers can issue demand drafts online.

A demand draft is a bank-issued prepaid instrument used for secure payment. It transfers funds from one bank account to another, either domestically or internationally, according on the purchaser's request. Banks offer online and mobile banking tools for issuing demand drafts. Customers can issue demand drafts online.

Features of the Demand Draft are as follows:

1. Payment on Demand: A demand draft is payable on demand, allowing the recipient (the law college) to present it to the bank and get payment instantly.
2. Prepaid Instrument: Demand drafts are prepaid documents, requiring the purchaser to pay the bank in advance. The money are transferred to the beneficiary upon presenting the demand draft.