Question

can any explain me discounting of bills of exchange ( function of commercial bank)

Answer 1

 

DISCOUNTING BILLS OF EXCHANGE:

A bill of exchange is a document acknowledging an amount of money owed in consideration of goods received. It is a paper signed by the debtor and the creditor for fixed amount payable on a fixed date.

Example: suppose A buys goods from B, h may not pay B immediately instead give B a bill of exchange stating the amount of money owed and the time when A will settle the debt. Now, B is in need of money immediately, so he will present this bill to the bank for discounting. The bank will deduct its commission and pay B the present value of the bill. When the bill matures after specified period, the bank will get payment from A.

Answer 2

Explanation:

Discounting of Bills of Exchange:

A bill of exchange is drawn by a creditor on the debtor specifying the amount of debt and also the date when it becomes payable. ... However, if the creditor needs money before the maturity period (i.e., 90 days), he can get it discounted from the commercial bank.