Foreign Demand Draft: Meaning, Benefits, Process

Foreign Demand Draft

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 NameFDD fee
Axis BankINR 500+ Service tax
HDFC BankINR 200- INR 500 (depending on the transaction amount)
Orient ExchangeINR 500

Also read: How To Easily Send Money Abroad From India?


Q1. Can I get a bank draft in foreign currency?

Ans. Yes. It is possible to get a bank draft in a foreign currency.

Q2. What are the benefits of a foreign draft?

Ans. Some of the benefits of the foreign draft include faster deposits, a fixed conversion rate, and no risk of bounced checks.

Q3. Are checks/drafts still used?

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.

About Blessy George

Blessy George is a seasoned finance specialist who specialises in school financing. With over two years of experience, Blessy has polished her abilities in negotiating the complexities of the education loan procedure and has become an expert at problem-solving in this arena. Her extensive knowledge of financial systems and lending practices, together with her rigorous attention to detail, has earned her the trust of students and parents seeking educational financial help. Blessy's passion for empowering individuals through education drives her dedication to developing customised solutions and ensuring that aspiring students can attain their academic goals.

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