Apart from accepting deposits and lending money, Banks also carry out, on behalf of their customers the act of transfer of money - both domestic and foreign.- from one place to another. This activity is known as "remittance business" . Banks issue Demand Drafts, Banker's Cheques, Money Orders etc. for transferring the money. Banks also have the facility of quick transfer of money also know as Telegraphic Transfer or Tele Cash Orders.
In Remittance business, Bank 'A' at a place 'a' accepts money from customer 'C' and makes arrangement for payment of the same amount of money to either the customer 'C' or his "order" i.e. a person or entity, designated by 'C' as the recipient, through either a Branch of Bank 'A' or any other entity at place 'b'. In return for having rendered this service, the Banks charge a pre-decided sum known as exchange or commission or service charge. This sum can differ from bank to bank. This also differs depending upon the mode of transfer and the time available for effecting the transfer of money. Faster the mode of transfer, higher the charges.
A demand draft or "DD" is an instrument most banks in India use for effecting transfer of money. It is a Negotiable Instrument. To buy a "DD" from a Bank, you are required to fill an application form which asks the following information :
Type of instrument needed
Name of the recipient
Name of the sender
Amount to be transferred
Place where the transferred money is to be paid
Mode in which money is to be paid i.e. in cash or through a Bank Account
Mode in which you will pay money to the Bank i.e. in cash or by debit to your account
The application form along with the cheque on your account or cash is deposited with the counter clerk who gives you a Demand Draft (which looks like a cheque) for the amount.
Check the particulars like name of the beneficiary, amount, place where payable etc. filled in the DD, match these with what you had filled in the application form.
Spellings of the beneficiary's name should be exactly the same.
Get the DD "crossed" for security.
Your PAN number will be necessary if the amount of DD exceeds Rs.10,000/=
Charges for issuing drafts differ from Bank to Bank. So if your requirements are large, do shop around for best bargain.
Mail Transfers or Mail Orders
This is the mode used when you wish to transfer money from your account in Center 'A' to either your own account in Center 'B' or to somebody else's account. In this mode of transfer, you are required to fill in an application form similar to the one for DD, sign a charge slip or give a cheque for the amount to be transferred plus exchange and collect a receipt. The Bank will, on its own, send an order to its branch at center 'B' to deposit the said amount in the account number designated by you.This is, however, a dying product and many banks like State Bank of India have since withdrawn this.
Telegraphic Transfers or Tele Orders
This is similar to the Mail Transfer except that the message is sent to center 'B' by way of a telegram and the money is deposited the next day. The mode of instructions nowadays is increasingly the fax.
More and more banks are now offering electronic mode of transfer of funds like Electronic Transfer System, Cash Management product etc. The remittance of funds through these modes is much quicker and the time is reduced to hours and in some cases even minutes.