Demand Draft is way for remitters to transfer money A demand draft is more secure than a normal cheque as it can only be credited to a specific payees account, and a customer can only be reimbursed under indemnity if the draft is lost or stolen. A demand draft can also be compared to a cheque. However, demand drafts are difficult to countermand. Demand drafts can only be made payable to a specified party, also known as pay to order. But, cheques can also be made payable to the bearer. Demand drafts are orders of payment by a bank to another bank, whereas cheques are orders of payment from an account holder to the bank.
Demand drafts are also known as sight drafts, as they are payable when presented by sight to the bank. Under UCC 3-104, a draft has been defined as a negotiable instrument in the form of an order. The person making the order is known as the drawer and the person specified in the order is called the drawee, as defined in the UCC 3-103. The party who creates the draft is called the maker and party who is order to pay is called the drawee.
