Compare · Side by side
Bank Draft vs Bill of Exchange
The word “draft” hides two different concepts.
| Question | Bank Draft | Bill of Exchange / Trade Draft |
|---|---|---|
| Basic idea | Bank-issued payment instrument, usually funded before issue. | Written order by drawer directing drawee to pay. |
| Issuer / drawer | Bank issues the bank draft. | Commercial party or other drawer draws the bill. |
| Sight / time | Product can vary; often used as payment paper. | Can be at sight or a future tenor. |
| Acceptance | Not the central concept of an ordinary bank draft. | Drawee can accept a time bill; bank acceptance can create bank obligation. |
| LC connection | Not the same as “drafts at 60 days after sight.” | Bills/time drafts can appear under LCs and collections. |
How to use this comparison
The labels are a starting point, not a substitute for the actual wording. Before choosing a structure, ask what creates the payment obligation, who carries the credit risk, what rules apply, what event triggers payment and whether the receiving bank or financier accepts the structure.
1. Obligation
Who actually promises or is ordered to pay?
Who actually promises or is ordered to pay?
2. Trigger
What must happen before payment is due?
What must happen before payment is due?
3. Rules & documents
What wording or documentary conditions control the result?
What wording or documentary conditions control the result?
4. Bank acceptance
Will the relevant bank accept, advise, confirm, finance or process it?
Will the relevant bank accept, advise, confirm, finance or process it?