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A bank draft can be defined as a negotiable instrument similar to bills of exchange, usually, a payment cheque where issuing bank or another of its branch processes payment on behalf of their client (drawer) to drawee’s A/c where drawer had already deposited equivalent funds in issuing bank A/c along with the applicable charges payable. It is also called a banker’s draft or teller’s cheque. Usually, like any other negotiable instrument, Bank Draft cannot be transferred in favour of any other person, i.e., it will be payable only in A/c of an entity whose name is mentioned as drawee initially.
Following are the basic characteristics are given below:
Types of Bank Draft
Advantages of Bank Draft
Disadvantages of Bank Draft
It is one of the payment mechanisms generally used in processing various government, educational institutions related payments. It is important for the security measures involved in it as it is authenticated and has the least risk factor. But as it is not a liquid asset, it has some formalities that make it a bit cumbersome. However, with the philosophy of digitalisation, nowadays, online transactions are becoming popular.
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