A bank draft is a type of payment instrument that is issued by a bank on behalf of a customer, and is guaranteed by the bank. It is similar to a cheque, but is considered to be a more secure form of payment as it is guaranteed by the bank rather than the customer.

To obtain a bank draft, a customer must first provide the bank with the necessary funds to cover the amount of the draft, along with any applicable fees. The bank will then issue the draft, which typically includes the name of the payee and the amount of the payment. The bank draft is usually made payable to a specific person or organization and is not transferable to another party.

Bank drafts are commonly used for large transactions, such as real estate purchases or international payments, as they provide a level of security and assurance that the payment will be honored. The bank draft can be deposited directly into the payee’s account, and once the funds are verified, the payment is considered to be settled.

One important thing to note is that bank drafts are not the same as cashier’s cheques. While both types of instruments are guaranteed by the bank, a cashier’s cheque is drawn on the bank’s own funds, while a bank draft is drawn on the customer’s funds held by the bank.