Ultimately, whether or not the bank draft is accepted is the prerogative of the receiving institution. Just as a bank has the right to refuse or confiscate cash that it suspects to be counterfeit, so too does the bank have the prerogative to reject a bank draft that it suspects to be lost, stolen, forged, or fraudulent in any way.
The longer the interval between the issuance of the bank draft and deposit, the more suspicious the receiving institution will become. Most payees demand bank drafts to guarantee they will have immediate access to funds without going through the process of clearing bounced personal checks or having credit cards rejected. Therefore, sitting on a bank draft for an extended period is inherently contrary to the purpose of the bank draft, which will raise the suspicions of the receiving institution.
If months have passed before the deposit, they may either contact the issuing bank for validation or simply reject the bank draft altogether. An important note within this topic is that foreign banks nearly always reject bank drafts after six months.
Bank drafts are valuable for foreign transactions for a couple of reasons, both of which help secure immediate access to foreign currency:. As with anything pertaining to international commerce, the threat of fraud is heightened. So, when receiving bank drafts outside of six months from issuance, foreign banks will generally reject the draft. To avoid the possibility that a bank draft is rejected, either at home or abroad, it is always best practice to issue it as close to the date of its expected deposit as possible.
In a less common scenario, the state may start escheatment. This is the process in which the government takes over inactive bank accounts. Checking Accounts. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification.
I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Banking Checking Accounts. Key Takeaways A bank draft is also referred to as a bank check or cashier's check. Some financial institutions abroad may not accept a draft that is over six months old. Bank drafts are often used when buying a home or condo, a new car, or even renting an apartment.
A bank draft is effectively similar to a money order, but there are more restrictions involved with money orders. Related Articles. As per RBI guidelines, with effect from April 1, , the validity period of Cheques, Demand Drafts, Pay Orders and Banker's Cheques will be reduced from 6 months to 3 months, from the date of issue of the instrument. This is to inform that by clicking on the hyperlink, you will be leaving sc.
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