Question

What was hundi?Why was it important for the traders to buy a hundi​

Answer 1

Hundi/Hundee is a financial instrument that developed in Medieval India for use in trade and credit transactions. Hundis are used as a form of remittance instrument to transfer money from place to place, as a form of credit instrument or IOU to borrow money and as a bill of exchange in trade transactions. The Reserve Bank of India describes the Hundi as "an unconditional order in writing made by a person directing another to pay a certain sum of money to a person named in the order."For example: Mr. A signs a hundi / promissory note to pay B , say Rs.10,000/- after 90 days .

So, B will get the money only after 90 days from A on showing him the promissory note he signed.

(I am keeping the explanation as simple as possible.)

Now , you may have read something about bill discounting which is possible in this case as well. So A can get his money on the very same day of signing the instrument.

It is believed that this practice is not prevalent anymore. Which is not true.

I hope this answers your questions.

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