How to Encash Foreign Currency Drafts in India?

A demand draft is a written order for making payment. It is very similar to a cheque, the only difference being that a signature is not required for it to be encashed. A foreign currency draft is one where the recipient or the sender is staying abroad.

To send money to someone staying in India, a foreign currency draft is a very good option. The main reason is that it is very economical. Generally the cost of making one is less and if we chose a suitable bank the charges are further reduced.

What is the procedure?

The procedure to cash a foreign currency draft is the same for all banks. The draft is to be presented in a bank in which the recipient has an account. The bank then credits the amount. The time taken for transfer is different for different banks.

What are the charges?

A good number of private banks charge only a minimum amount on the draft irrespective of the amount. The charges are about Rs 300 per draft.

Some nationalized banks charge amounts lower than those of private banks. This is because they charge only a percentage of the draft amount along with the postage charges. This works to anywhere between Rs 75 to Rs 100 per draft.

The highest charge is that of Standard Chartered Bank. If you receive a dollar draft drawn on Standard Chartered Bank, an amount of Rs 500 is directly deducted from their Indian branch. Apart from this amount the bank charges also have to be paid. Hence it is advisable that the cheque is drawn on some other bank. This reduces the bank charges.

How long it will take to encash?

Most private banks like ICICI credit your account after about 21 days. Nationalized banks like Canara bank credit your account after 30-45 days. In case of urgent requirement, the bank reduces the time by using fast courier services; but the charges are significantly increased.

What are the precautions while using foreign currency drafts?

Foreign currency drafts form West African countries like Nigeria, Benin, and Ghana are often fake. The bank charges for returned cheques are quite high. In case of return cheques from US the charge is about Rs 450. In case of return cheques from any European country, the charges work out to be Rs1500. Apart from this, an additional Rs 100 is charged per retuned cheque. Hence it is always better not to accept cheques from unknown people.