Defination And Features of Draft

Section 85 A of the Negotiable Instrument Act- 1881 defines a Draft as: "an order to pay money, drawn by one office of a bank upon another office of the same bank for a sum of money payable to order on demand". If the definition is carefully analyzed, the following will emerge as the essential features of a Bank Draft:

1. It is drawn by one office of a bank upon another office of the same bank;
2. It is payable on demand; and
3. Its payment has to be made to the person whose name is mentioned therein or according to his order.

It may be mentioned here that Drafts are not payable to bearer. Once these are issued by banks, the remitter or in other words, the purchaser of the draft/ceases to be any party to the instrument. Instead there remains three parties to the instrument.These are: (a) Drawer branch (b) Drawee branch and (c) Payee.