A foreign currency demand draft is a negotiable financial statement/bank draft used by banks to facilitate payment. A foreign demand draft (FDD) is used by a customer to send money from the domestic bank to an international bank account. As a result, it is also known as the foreign exchange demand draft. Similar to a demand draft, a foreign exchange demand draft is drawn on behalf of the beneficiary. It can be used to make several kinds of payments. A foreign demand draft can be purchased at a commercial bank. However, a minor fee needs to be paid for the same. Keep reading to know more about the foreign demand draft, its benefits, processes, and more.
Benefits of the Foreign Demand Draft
The following are the benefits of the foreign demand draft:
- Foreign demand draft cannot be misused as the details of the beneficiary are required to make the payment
- FDD can be issued in several currencies including USD, EUR, AUD, and GBP, among others
- The customer has to make a minimum amount of fixed fee, and applicable service tax. Hence, it is a low-cost option.
- It allows the individual to withdraw any amount. However, it has to be in accordance with the rules of the Foreign Exchange Management Act (FEMA)
- Lastly, it provides a fast and hassle-free remittance solution for customers
Also Read: What Is The Best Way To Send Money Internationally?
How Does it Work?
A foreign demand draft can be explained as a bill of exchange. It is drawn in one country and payable in a different country.
- A bill of exchange is a written statement that binds a party to pay a fixed amount to another party at a predetermined date/on demand.
- A bill of exchange would become the bank draft, a credit instrument where the bank that is issuing the money guarantees payment.
- It is done after making sure that the issuing account has the amount of money that it wants to send.
- To obtain a bank draft it is essential to submit the depositing money to equal to the check amount. Moreover, fees are applicable for the same.
- FDD is used when it becomes expensive to obtain the foreign currency required for an international transaction. FDD helps in establishing credit accounts in that country.
- Later, it is denominated in the local currency and is used for payment.
- Next, the sender can pay back the money to the bank in the local currency.
- However, fees and exchange rates matter. Hence, FDD is a useful tool that facilitates international transactions.
Relevant Read: How To Transfer Money Internationally Between Banks?
Documents Required to Buy a Foreign Currency Demand Draft
Below are the documents required to buy a foreign currency demand draft.
| Documents Required |
| Visa/Passport/Ticket (Only when the purpose is travelling) |
| Application form and the declaration form under the LRS scheme |
| FEMA and FORE A2 declaration |
| Pan Card |
| Invoice/Details of the amount to be paid by the beneficiary |
Foreign Demand Draft Process
The process of getting a foreign demand draft is as follows:
- Create an active saving account in a bank
- Reach out to the bank/financial institution to send the money
- Fill out the online/offline demand draft request form
- Enter the details of the recipient in the form. For example, name of the sender, location of the transferable amount, amount to be transferred, and mode of payment (Bank account/cash).
- Moreover, the details of repayment of the amount to the bank need to be mentioned.
- Next, the money will be remitted to the recipient’s bank account. A few days might be required for the same. For example, 7-28 days is the usual time.
- In case, a demand draft is lost another one can be requested from the bank
Also read: List Of International Money Transfer Companies
Foreign Demand Draft: Banks and Fees
Most of the banks offer the foreign demand draft service. However, a small fixed amount has to be paid for the same. It varies on the basis of the bank. Here is a list of a few banks offering the FDD service.
| Bank Name | FDD fee |
| Axis Bank | INR 500+ Service tax |
| HDFC Bank | INR 200- INR 500 (depending on the transaction amount) |
| Orient Exchange | INR 500 |
Also read: How To Easily Send Money Abroad From India?
FAQs
Ans. Yes. It is possible to get a bank draft in a foreign currency.
Ans. Some of the benefits of the foreign draft include faster deposits, a fixed conversion rate, and no risk of bounced checks.
Ans. Foreign currency demand drafts are often used when smaller amounts of transactions have to be made. They are even used in situations where timely delivery is important.
For example, tax payments, rent payments, and tuition payments. Several industries also prefer the use of payment by-demand drafts like the music industry and real estate industry.
FDD is a negotiable instrument used by banks to make international payments. FDD is used to send money to another country. It helps in mitigating the effects of the exchange rates, and bank routing delays. Moreover, it is a cheaper and more efficient way of sending money.
For convenient international money transfers and study abroad loans, reach out to Fly Finance experts at 1800 572 126 for end-to-end guidance.
