Trading or selling a bill of exchange prior to the maturity date at a value less than the par value of the bill. The amount of the discount will depend on the amount of time left before the bill matures, and on the perceived risk attached to the bill.
Definition of bill discounting: Trading or selling a bill of exchange prior to the maturity date at a value less than the par value of the bill.
If a bank lends against such bills receivable, it is called as bill purchase. There are also bills drawn with a credit period (usance) which are payable after the credit period. Bank lending against such receivables is called discounting
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