BILL DISCOUNTING

U.KALPANADEVI ( II-MBA)MICHAEL INSTITUTE OF MANAGEMENT- MADURAI

When the seller (drawer) deposits genuine commercial

bills and obtains financial accommodation from a bank or

financial institution, it is known as bill discounting‘.

•BILL DISCOUNTING

1. Discount charge

2. Maturity

3. Ready finance

4. Discounting and purchasing

Features of bills discounting

CONDITIONS A bill must be a usance bill.

It must have been accepted and bears at least two good signatures (e.g. of reputable individuals, companies or banks etc.)

The Bank will normally only discount trade bills.

Where a usance bill is drawn at a fixed period after sight the bill must be accepted to establish the maturity.

CONDITIONS The discount should be based on real trade background.

The discount tenor starts from the date of discount and expires at the maturity of the bill.

a. Examination of Bill

b. Crediting Customer Account

c. Control over Accounts

d. Sending Bill for collection

e. Action by the Branch

f. Dishonor

Steps In Discounting And Purchasing

1. Easy access2. Safety of funds3. Certainity of payment4. Profitability5. Smooth Liquidity6. Ideal investment7. Relative stability of prices

Advantages of Bills discounting

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