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DRAFTS

1. INTRODUCTION

A demand draft is an unconditional order issued by one branch or office


of a bank on another branch or office of the same bank to pay a certain sum of
money on demand to a certain person or to his order. It is a negotiable
instrument and the statutory protection extended to banks in the collection
and payment of cheques under the Negotiable Instrument Act is extended to
the demand draft also.

2. BRANCH TO CARRY ADEQUATE STOCK:

Indents for supply of fresh Drafts(continuous stationary)should be sent


well in advance so as to ensure adequate stock always at the branch.

3. VERIFICATION OF SUPPLY:

Blank Draft Forms are supplied in continuous numbers. When the


Drafts are supplied,
the branch should verify that:-

a) The supply has been correctly invoiced;

b) The Draft forms are properly numbered and

c) No form is missing.

If there is any discrepancy, the fact shall at once be brought to the


notice of Stationery and Demand Draft Department at Head Office, under
intimation to concerned Regional Office, for taking up the matter with the
Printers as well as for circulating the information of the loss to the
branches/offices.

4. Custody of the Stock :

The Drafts received by the branches should be entered and the stock
should be maintained in the CBS system as per norm.

5. The drafts should remain under the custody of authorized


officer at all times and no unauthorized employee or outsider must ever be
given any access thereto. Great care must be taken by the authorized officer in
ensuring that no leaf is so removed. The number of drafts issued during the
day and the draft stock in hand should be carefully reconciled by him every day
after the days transactions are over.

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6. APPLICATION FOR DRAFTS:

Application for a draft shall be made in Form No. 341, duly filled in by
the Applicant and signed (with address and mobile / telephone number). It is
important to see that all the columns in the form such as name of beneficiary,
amount, exchange and the Centre/Branch on which the draft is required are
properly filled in and that the form is signed by the purchaser. Application for
purchase of a draft may be made by the existing customer by a letter duly
signed by him and addressed to the Branch authority, giving the full particulars
of the draft intended to be purchased.

7. TENDERING OF PURCHASE CONSIDERATION OF THE DRAFT:

The amount of draft plus exchange may be tendered by the purchaser in


Cash/ by a Cheque (cash draft maximum for less than Rs.50000.00) drawn on his
account with any of our branch or by authorizing the branch to debit his account
through the letter-cum-application for purchase of the Draft.

The customers signature on the letter shall be verified and an


application in Form No. 341 prepared under the authentication of an authorized
official before passing the entries. The letter shall then be cancelled by drawing
two oblique lines across it with words EP (i.e. Entries passed) and kept attached
to the debit voucher (where account is debited) or to the application (where a
cheque is sent along with it) as the case may be.

Note: Application for a Draft in favour of the Bank itself must specifically
mention the account to which the proceeds of the draft are to be
credited.

While accepting consideration from customer for issuance of DD Branch will make the
credit transaction, either through TM or DDMI, in the office account number
00980124001111 only, no matter from which branch the credit is initiated.

7. EXCHANGE FOR DRAFT:

For each Draft issued, exchange should be charged strictly


accordingly to Banks Schedule of Charges subject to any relaxation that is
allowed by competent authority. Though the DD amount shall be credited to
00980124001111, the exchange part shall be automatically credited to the P&L
Exchange on Demand Draft of the issuing branch.

8. Steps prior to printing/writing a draft

a) *Branches must ensure before printing a DD that the Printed Serial Number (PSN)
of the DD appearing on MICR band matches with the number displayed on the
screen. As per present practice the Branch Serial Number (BSN) will be identical to the
PSN of the DD. This will be printed on the body of the DD above the MICR band. Branch
must ensure that PSN and BSN are identical.

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In case of any mismatch they must make necessary rectification before proceeding
with the printing of DD. Only after funds being deposited for the draft/drafts to be
purchased or where so instructed, on the applicants account being debited and
authorized for such debit the authorized staff will proceed to print the draft.

9. Scrutiny of the particulars of Draft

Branch Officials shall make thorough scrutiny of the DD printed by the


system and match the particulars like PSN, BSN, Payees name, amount, date,
drawee branch name etc. If some discrepancy is detected at the time of scrutiny
the branch will cancel the DD and issue a fresh one.

10. Printing/Writing of Branch Name and Code Number

On the funds being deposited or where so instructed, on the


applicants account being debited and duly authorized, the authorized clerk
will proceed to print the draft. All branches must ensure that only system printed
DD is issued to the customers. When printing of DD is not possible due to some
unavoidable situation like printer not working, branches with prior consent of their
controlling office shall manually prepare the DD. It is advised that when such
manual DD is prepared the branches must get the DD printed in global printer and
write the contents of such printed DD on the DD to be issued. Though the DD will
be payable at par at all branches except the issuing branch, it will bear the name of
the drawee branch. The drawee branch name will be as per the application of the
purchaser.

11. PUNCHING THE APPROPRIATE CATEGORYOF DRAFT SERIES:

The alphabetical code OT,TT,OL & TL indicating the value range of drafts
and are printed in horizontally cages on the left side of the draft
instrument.

Depending upon the amount of the draft issued, one of these cages is to
be punched to indicate amount or value range of the draft as explained
below:

Amount of Draft Cages to be punched

Below Rs. One thousand OT

Rs. One thousand and above but TT

Below Rs.10000/-

Rs. Ten thousand and above but OL

Below Rs.1 lac.

Rs. One lac and above but TL

below Rs. Ten lacs

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In addition vertically arranged cages with pre-printed number from 1 to 9
provided along with the right hand edge of the Demand Draft leaf.
Corresponding to the first digit of the amount of the draft (left most digit)
one of the numbered (vertical) cages is to be punched. For example, if the
value of the draft is Rs. 30000/-, punching should be made against OL on
the left side and 3 on the right side of the draft leaf. It is not permitted to
put cross-mark or tick-mark in the cage by dot pen. For demand draft
below Rs. 100/- the cage ;1; should be punched.

12. PROTECTOGRAPHIC THE DRAFT:

Use of protectographic security of Draft may be dispensed with as the


system prints Amount NOT OVER Moreover, such machines are out of
use now.

13. DRAFTS TO BE FREE FROM ALTERATION: SPOILED DRAFT FORM:

The Draft shall have to be issued free form alteration. When a draft leaf
is spoiled in

Preparation it will be marked cancelled under authentication of the


authorized officer

and it should be preserved for record after noting the same in Draft
Issue Register.

14. SIGNING OF DRAFT BY AUTHORISED SIGNATORIES:

a) SCRUTINY OF THE PARTICLARS OF DRAFT:

The authorized official(s) will scrutinize the draft after printing and
sign the Draft. The

authorized official(s) after putting his/their signature(S) will affix a


rubber stamp which

should clearly indicate his/their abrogated name(s) and signature


serial number(s) as

recorded in Facsimile Specimen Signature Book. The authorized


official(s) shall exercise

utmost care in signing so that his/their signature(s) tallied with the


recorded specimen.

b) LIMITS OF AUTHORITY FOR ISSUANCE OF DEMAND DRAFT:

i) Drafts upto Rs.10000-/ shall be issued by all branches under the


single of the

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authorized official.

ii) Drafts beyond Rs.10000/- should bear the signatures of two


authorized officials.

iii) Branches which have one officer will draw Drafts under single
signature in favour of

Banks for any amount in settlement of collection items such as


bills and cheques

received by them.

iv) In case a branch which is run by a single officer, is required to


issue Demand Drafts

for value more than Rs.10000-/, such Drafts would be issued


under the joint

signature of the Officer-in-Charge of that branch and Special


Assistant, if any, or in

his absence, the Head Cashier/Charge Cashier within the limits


fixed by Head Office.

The Special Assistant or the Head Cashier in that event should


put his signature

Affixing a rubber stamp which should clearly indicate his


designation. Moreover, is

to be ensure that Drafts are within the maximum limits of


authority for issuance of

Demands Drafts under joint signatures of two officers varying


according to size and

location of the branches.

v) When a branch, run by more than one officer, is required to


issue a demand draft

for value more than the ceiling amount under single signature
due to circumstances

beyond its control i.e. absence of official(s), a special legend


may be branded on the

draft issued under single signature, other officer(s) absent.


However, the Branch

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may otherwise issue multiple instruments to cover the value.

15. NO BEARER DRAFT:

No bearer draft shall be issued as it would contravene


Section 31 of the Reserve Bank of India Act.

16. Payment of Draft:

Since the Draft is payable at par, the payment shall be made by the
branch

Where it is presented by customer or received through clearing as if the same


is drawn

on them. In all cases Centralised Draft Account i.e. 00980124001111 shall be


debited.

All the drafts issued prior to CBS are Stale and will have to be
cancelled. On receipt of non-CBS drafts branches shall have the Status report of the
instrument from Demand Draft Department (circular No.DD/DD/ 2 /OM-0277/11-12
dated 04-08-2011) and then they may pay the draft after the same has been inserted
into system by our CBS Department.(For status report branches shall have to send
mail to smdd@unitedbank.co.in)

a. Mode of Payment

Draft can be paid in all three modes like Cash/Clearing/Transfer subject to


applicable restriction on amount of payment. In order to ensure that a DD is
paid only if it is issued in the system, there will be a validation run before
payment. The system will match the user inputs of following details in the
system besides validating against hot listed items:

i. Printed Serial Number

ii. Issue Branch

iii. Issue Date

iv. Issue Amount

b. Scrutiny of Drafts before payment :

When a Draft is presented for payment, it should be carefully examined to see


that it is in order in all respects on the following points :-

i) The draft is written on the Banks standard Form.

ii) It does not carry any material alteration and if there is any, it has been
properly authenticated;

iii) The draft bears signature(s) of the issuing branch along with his/their
signature serial number(s) and the signature(s) tallies with the
recorded specimen in the Facsimile Specimen Signature Book.

iv) In case of presentation over the counter, if the demand draft does not
appear to have been crossed, payment may be made on proper
identification of the payee. The payee may be identified as an account

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holder of the bank if his account is maintained with the branch. Valid
passport may also be accepted for the purpose of identification.

v) In case where the draft is deposited in an account in the paying branch


itself, special care is to be taken because the branch is both the
collecting and paying banks.

vi) In case the draft is presented through clearing, the endorsement(s)


and/or collecting Banks discharge should be properly scrutinized.

vii) The draft should be examined under an ultra-violet ray lamp wherever
such machine is available for detecting possible chemical alterations.

viii) It should be ensured that there is no intimation of the draft having


been lost or stolen.

C) Some exceptions

In rare cases, paying branches may encounter some exceptional situations.


We list below such situations and possible remedies.

i. Exception-1 (Mismatched Items): Branches will check the input


made in the system after uploading Inward Clearing data with actual
instrument. If there is any error in input the branches will rectify the
same. However, if it is found that there is no error in input but the DD
MICR (Printed) Number of the instrument is different from DD System
generated number printed on the body of the draft then it is a case of
printing problem during issuance as mentioned above. Branch will
then replace DD MICR (Printed) Number entered with DD number
(System Generated and printed on the body of the Draft). The
exception made is to be recorded on the body of the draft as SERIAL
MISMATCHED DD. The system will validate the draft and make
payment if it is not marked CAUTION. All other drafts where there is
mismatch or marked caution is to be handled as per extant
procedures.

ii. Exception-2 (Not found Items) : If the system indicates no such


DD exists whereas such an instrument is presented for payment,
branch will enter 0 in the DD number and check whether all other
fields of the draft match. This can be a case of system getting hanged
during printing and the records not updated properly. If such a draft
exists in the system having all other details the branch will make
payment only in such cases by entering 0 as DD Number and record
the same on the body of the draft.

17. Lost Drafts

a. Information received by the issuing branch from the purchaser

The issuing branch will first of all check the status of the DD. If it remains
unpaid then a caution mark will be made to the DD using DDSM menu.
However, the branch must, prior to marking caution verify the authenticity of
the instructions.

b. Information received by the drawee branch from the purchaser

In such a situation the drawee branch or for that matter any branch shall
make note of the loss only if the authenticity of instruction is established.

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Otherwise, the branch will advise the purchaser to approach the issuing
branch

c. Recording of Lost DD Leaves before Issuance :


When DD leaves are lost before issuance of the Draft from the custody of the
branch, the branch concerned must immediately add the lost
instruments in the hot listed items by using CHIM menu option and
inform vigilance department and other authority as per extant guidelines in
this regard.

18. Duplicate Draft

a. Issuance of Duplicate in lieu of original reported lost

The issuing branch, on receipt of such a request, will check the status of the
DD in question. If the same is found unpaid, the authenticity of request is
established beyond doubt and appropriate indemnity is executed by the
purchaser and payee, the issuing branch shall cancel the DD and issue a
fresh Demand Draft in lieu of it. It may be noted here that obtaining of
Non Payment Certificate from drawee branch shall be no longer be
necessary before issuance of duplicate DD as has been done now, as
this information will be readily available from the system.

b. If the payee declines to join the indemnity, a declaration shall be obtained from
him to the effect that the draft has not been received by him or lost from
his custody : that he has no objection to a duplicate draft being issued to the
purchaser and that the original draft, if received later, will be returned to the
Bank. The signature of the payee (and of the endorsee, (if any) must be
attested by his banker or by a respectable person other than the purchaser,
known or acceptable to the Branch.

19. Refund of Draft amount/Cancellation of Draft

a. Cancellation of Draft

The purchaser or his authorized agent shall make an application to the Branch
from where the DD sought to be cancelled was issued, along with the original
DD. Branch will verify the genuineness of the instruction from the original
application of purchase. On satisfaction of genuineness of the instruction a
transaction process is initiated using DDC menu option and DD amount less
Cancellation charges, if any, is refunded to the purchaser by a mode of
payment as requested and as per Banks norm. It may be noted here that
only the issuing Branch can cancel the DD.

20. Caution Marking of Draft

At times for various reasons purchaser or beneficiary of the DD approaches


the Bank to mark a Stop Payment against an issued draft. The system
provides facility of CAUTION marking in case of lost DDs. Once a DD is
cautioned the system will throw an alert at the time of making payment of
such instrument. As per extant guidelines branches are to return the
instrument with the reason Draft Reported Lost.

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21. Stale Draft

A DD becomes stale after three months from the date of issue. The system
automatically marks it as stale.

22. Revalidation of Draft :

When a request is received from an individual customer for revalidation of the


DD, the issuing branch will cancel it and issue a fresh DD. In case the DD in
question is a Pre-CBS DD, branch will send e-mail to DD Department asking to know the
Status of the Draft and approach Data Center for adding it in the system. Thereafter it will
be cancelled and if requested, a fresh DD mayl be issued.

In case of Institutions approaching for revalidation of a large number of Drafts the


branch will take advise from Data Center for handling such situations. However this
can be done only on a pre-determined date and after approval from appropriate
authority for specific institutional customers.

In case of the beneficiaries of drafts are Government Departments, at their specific


request, the issuing branch, with prior approval from Chief Regional
Manager/Regional Manager, may consider payment of such Drafts presented even
after the validity period is over.

23. Accounting entries relating to issuance and payment of Demand Draft

a. Draft Account

There will be only one account for DD across the bank namely,
00980124011111

b. For Issuance of Draft

c. The CDA shall be used by all branches for issuance of CBSDD.

d. For Payment of Draft

The CDA shall be used by all branches for payment of CBSDD.

e. Transfer of Closing Balance of Draft Account

There will be no necessity of transferring the Closing Balance of DD account


annually to Head Office. As regards balance in existing SOL specific Draft
Account suitable instructions will follow, in due course.

24. MISUSE OF BANKING CHANNELS FOR VIOLATION OF FISCAL LAWS AND EVATION OF
TAXES-

ISSUE AND PAYMENT OF DEMAND DRAFT FOR RS.50000/- AND ABOVE.

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The Reserve Bank of India has decided in consultation with the Government of India and
Indian Banks Association that in order to curb the misuse of Banking Channels for
violation of fiscal laws and evasion of taxes, demand drafts, mail transfers, telegraphic
transfers and travelers cheques for Rs.50000/- and above should be issued by Banks
only by debiting the customers account or against cheques or other instruments
tendered by the customer and not against cash payment. Similarly, such payment of
Rs.50000/- and above should be made through Banking channels and not in cash.

Demand Drafts & Pay Orders for Rs.50000/- and above should strictly be issued by
debiting customers A/c or against Cheques only. In no case Drafts/Pay Orders of
Rs.50000/- and above are issued against tender of cash even by splitting the amounts in
favour of the same beneficiary, purchased by the same purchaser.

No Drafts/Pay Orders should be issued against Inter Branch Credit in Transfer mode.
This will be in violation of Head Office Guidelines issued on the strict prohibition made by
Reserve Bank of India

IN NO CASE SINGLE DRAFT AMOUNTING TO RS 10.00 LAKH (RUPEES TEN LAKH) AND
ABOVE SHOULD BE ISSUED IN A SINGLE DRAFT LEAF. FOR ISSUANCE OF DRAFTS FOR
AMOUNT OF

RS.10.00 LAKH & ABOVE, MULTIPLE DRAFTS MAY BE ISSUED TO COVER THE TOTAL VALUE

REQUIRED. THE BRANCHES SHOULD PERSUADE CUSTOMERS TO AVAIL NEFT/RTGS/PAY


ORDER FACILITY FOR REMITTANCES OF RS. 10.00 LAKH & ABOVE.

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