ICSE Class 10 Answered
What is discounting bills of exchange?
Asked by Akash | 02 Feb, 2020, 07:16: PM
Expert Answer
Bill of exchange is an instrumenmt in writing containing an unconditional order signed by the creditor, directing the debtor to pay a certain sum of money on maturity.
If the creditor of the bill of exchange wants the money immediately, the bank provides him the the money by discounting the bill of exchange. The bank deposits the amount of the bill in the current account of the bill holder after deducting its rate of interest. When the bill of exchange matures, the banks gets its payment from the debtor of the bill.
Discounting bills of exchange is a type of lending done by banks.
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