A sight draft is a bill of exchange that is due and payable on demand. When delivery of the shipping documents acceptance of the draft by the buyer, the bank actually withdraws money from the buyer’s account and forwards it to the selling firm. It is a draft that is payable on demand, especially one due for payment upon presentation.
Sight drafts are used with both air shipments and sea shipments for financing transactions of goods in global trade. Simply it is called Demand for immediate payment. This instrument is used when an exporter wants to retain title to shipped goods until paid, typically because the importer is considered to be a credit risk. The characteristics of a sight draft include those of all drafts, with the distinguishing trait that sight drafts are always payable when presented, in a manner somewhat akin to bearer instruments.