What are the types of commercial paper?

The Uniform Commercial Code identifies four basic kinds of commercial papers, they are-

  1. Promissory notes- is a written pledge to pay money. An individual, who is the maker of the note, promises to pay the holder. Payee could be anyone who has the possession of the promissory note, or a specific person named in the note. 
  2. Drafts – is a three-party paper confirming the payment. In this case, it is the drawer who issues the order to pay, whereas the drawee is the party to whom the order to pay is given. 
  3. Cheques – are drawn on a bank. It is either payable on demand to a person specified or the holder.
  4. Certificates of deposit – is an acceptance by the bank of the acquisition of a specific sum of money from a depositor for a specific time. The bank promises to repay the amount with interest after maturity. In the case of CD, the bank is the maker, as well as, the drawee, while the person making the deposit is the payee.

Further Readings – 

  1. Types of Cheque in Indian Banking System
  2. Chequebook Diplomacy
  3. Financial Market

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