Discounting bills

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Querist : Anonymous

Querist : Anonymous (Querist)

16 March 2012 what is meaning of Bill Discounting & how it done please explain me in detail.

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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21 March 2012 One of the methods of getting working capital is discounting Bills of Exchange with Banks or Financial Institutions. Goods can be sold against advance receipt of money, against payment on delivery or against deferred payment or Credit
Sales. In case of credit sales, the seller & buyer can have an agreement/understanding wherein, the seller will draw a bill of exchange and the buyer will accept it.

The sale documents & the Bill of Exchange will generally be exchanged between the parties through their respective banks. In case the seller is in need of money and has creditlimits & sub-limits with his/their bank, he/they can get the bill discounted with his bank and take money. The seller/borrower should pay interest on the amount availed against the bill in the name of Bill discounting Charges.
Bills will be fora specific period and the bank will extend bill discounting credit for a period not exceeding the due date of the bill. When the customer/buyer pays the money, the same will be adjusted the credit extended to the seller.

Bill facility will be given against domestic as well as export transactions and is a common method of working capital finance. For more knowledge and practical input in the methodology and specifics, approach your bank.

for info:

https://www.hsbc.co.in/1/2/corporate/corporate-banking/bill-discounting

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