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Banker’s Cheque or say pay order is an instrument, generally non-negotiable, issued by the bank on behalf of the customer, containing an order to pay a specified sum to the specified person, in the same city. On the other hand, demand draft is a financial instrument, used by people for the purpose of transferring money from one place to another
Banker’s Cheque (Pay Order)
The banker’s cheque or otherwise known as pay order is an instrument issued by the bank on the behalf of a customer, containing an order to pay a certain sum to a specified person, within the city. The validity period of the Banker’s cheque is 3 months; however, it can be re-validated subject to some legal formalities.
In Banker’s cheque, the chances of dishonor are not possible because its mode is prepaid. It is always pre-printed with the words ‘not negotiable’ which means it cannot be further negotiated.
Demand Draft
Demand Draft is a negotiable instrument issued by the bank on the behalf of a customer, containing an order to pay a certain sum to the payee from one branch to another branch of the same bank. The validity period of a demand draft is three months, but it can be re-validated against an application. It can never be dishonored because its payment is done in advance. A demand draft of Rs. 20000 or more can be issued only with A/c payee crossing.
| BASIS FOR COMPARISON | BANKER’S CHEQUE | DEMAND DRAFT |
|---|---|---|
| Meaning | Banker’s Cheque or Payment Order is a cheque issued for making the payments within the same city. | Demand draft is a negotiable instrument used to transfer money from one person at one city to another person in another city. |
| Special feature | All banker’s cheque are pre-printed with “NOT NEGOTIABLE”. | Demand draft of Rs. 20000 or more should be issued with “A/c payee” crossing. |
| Clearance | It can be cleared in any branch of the same city. | It can be cleared at any branch of the same bank. |
