This article studies the service charges levied by banks on demand drafts. Though the Reserve Bank of India advocated a reasonable level of service charges for demand drafts as early as February 2007, it did not prescribe any explicit thresholds or measures of "reasonability". It proposes a rationalisation of such fees by looking into the demand draft charges of 37 select banks comprising 89% of the network of bank branches in India. The analysis carried out here has an underlying premise that competitive market pricing is required to safeguard consumer interest, and if the market fails to have a pricing structure which is competitive, it becomes imperative to take recourse to public policy to protect consumer interest.
