Difference between a Cheque and Draft

Cheque has been defined in Negotiable Instruments Act 1881 section 6. A cheque is a bill of exchange drawn on a specified bank and not expressed to be payable otherwise than on demand.

A demand draft has been defined by Negotiable Instruments Act 1881 in section 85. A demand draft is an order to pay money drawn by one office of a bank upon another office of the same bank bank for a sum of money payable to order on demand.

Following are some more differences:

• A cheque can be made payable to bearer but a Demand Draft cannot.
• A demand draft can be cleared in a specified branch of the issuer bank
• A cheque can get dishonored but Demand draft is always honored.
• An issuer party of the cheque is liable to the cheque and not backed by a Bank Guarantee, A demand draft is backed by a bank guarantee