Question

Commercial bills advantage & disadvantages

Answer 1

Answer:

Commercial bill market is an important source of short-term funds for trade and industry. It provides liquidity and activates the money market. In India, commercial banks lay a significant role in this market due to the following advantages:

Liquidity:

Bills are highly liquid assets. In times of necessity, bills can convert into cash readily using rediscounting them with the central bank. Bills are self-liquidating in character since they have fixed tenure. Moreover, they are negotiable instruments and hence they can transfer freely by mere delivery or by endorsement and delivery. disadvantages

Lack of bill culture•Stamp duty•Inadequate credit rating•Absence of active secondary market •Administrative problem