Demand Draft Rules: ₹50,000 Cash Limit, 3-Month Validity, Lost DD and Duplicate in 15 Days

Step one: decide how you will pay the bank. That choice matters more than most people expect, because a demand draft of ₹50,000 or more cannot be bought with cash. Demand drafts are still widely asked for: college admission fees, rent deposits, government tenders, court payments and some property deals. Yet the rules on cash, validity and lost drafts are often misunderstood at the counter. This guide covers the RBI demand draft rules that apply today, in the order you will meet them: buying the draft, using it, and what to do if it expires or goes missing.

Demand draft rules at a glance

Step 1: Buying a demand draft

Cash or account debit

Under the RBI’s KYC Directions, any remittance by demand draft, mail or telegraphic transfer, NEFT, IMPS or any other mode, and travellers’ cheques, for ₹50,000 or more must be made by debit to the customer’s account or against a cheque, not against cash. So for a ₹75,000 fee draft, the bank will debit your account or accept your cheque; it cannot take ₹75,000 in notes.

Below ₹50,000, you can pay cash. The RBI’s customer-service rules say banks should issue small drafts against cash to everyone, whether or not they hold an account, and branch staff should not refuse small-denomination notes.

Walk-in customers

If you are not an account holder, the bank must carry out customer due diligence for an occasional transaction of ₹50,000 or more, which means showing identity documents. Banks also watch for a large payment split into several drafts just below the threshold; the KYC rules specifically name such structuring as a red flag.

What the draft will show

The bank must print the purchaser’s name on the face of every demand draft, pay order and banker’s cheque issued on or after 15 September 2018. This makes the payment traceable and is one reason drafts are not anonymous.

Fill the form carefully

• Write the payee’s name exactly as the recipient wants it, for example “Registrar, XYZ University”.
• Write the payable-at city where the payee will deposit it.
• Check charges in advance: banks set their own draft commission.

Step 2: Using the draft

A demand draft is valid for three months from its date. The KYC Directions say a bank shall not pay cheques, drafts, pay orders or banker’s cheques presented more than three months after their date. The recipient must deposit it within that time.

The draft goes into the payee’s account through cheque clearing, so funds normally arrive at the same pace as a cheque; see how long cheque clearing takes. RBI rules also require banks to pay drafts drawn on their branches immediately, without refusing only because an advice has not arrived.

Step 3: If the draft expires

A draft that has crossed three months is not cancelled money. It must be revalidated or cancelled by the issuing bank.

1. Take the expired draft to the issuing branch, or the purchaser’s home branch.
2. Ask for revalidation (a fresh validity period) or cancellation and refund to the purchaser.
3. Expect a fee as per the bank’s schedule.

RBI rules ask banks to keep the revalidation procedure simple. A refund normally goes to the purchaser, not the payee.

Step 4: If the draft is lost

1. Inform the issuing bank immediately in writing, with the draft number, date, amount and payee, and ask it to stop payment.
2. Apply for a duplicate. The request must come from the purchaser or the beneficiary.
3. Give an indemnity. For drafts up to ₹5,000, the bank may issue a duplicate on adequate indemnity without first getting a non-payment advice from the paying branch. For larger amounts, the bank will usually confirm the original has not been paid before issuing a duplicate.
4. Expect it within 15 days. The bank must issue the duplicate within a fortnight of your request. If it takes longer, it must pay interest for the delay at the rate for a term deposit of matching maturity.

The fortnight rule does not apply to drafts endorsed to third parties.

Demand draft vs pay order vs banker’s cheque

The three-month validity, the ₹50,000 cash restriction and the purchaser’s-name rule apply to all of them.

Safer alternatives

Many institutions now accept NEFT, RTGS or UPI, which are faster and leave a clear record. If someone insists on a draft for a large payment, use it, but never hand a draft to an unknown agent. If you are paying by cheque for a large amount, Positive Pay adds a layer of protection. If money leaves your account through an electronic transaction you did not make, see RBI’s zero-liability rules.

Before you head to the branch, check these answers.

FAQs

Can I make a ₹60,000 demand draft with cash?

No. Drafts of ₹50,000 or more must be paid by debit to your account or by cheque.

How long is a demand draft valid?

Three months from its date. After that, it must be revalidated or cancelled.

How long does a duplicate demand draft take?

The bank must issue it within a fortnight of the purchaser’s or beneficiary’s request, or pay interest for the delay.

Can a non-customer buy a demand draft?

Yes, especially small drafts against cash. For ₹50,000 or more, identity verification applies, and payment cannot be in cash.

Takeaway: The key demand draft rules are simple: no cash for ₹50,000 or more, the purchaser’s name on the draft, three months’ validity, and a duplicate within a fortnight if it is lost. Keep the counterfoil and receipt until the payee confirms the money has been credited.