Discuss the meaning of discounting bills of exchange

Discounting of bill refers to the encashment of the bill before the date of its maturity. The bank deducts its charges from the bill.

  • The bank shall make the payment of the bill after deducting some interest (called discount in this case). This process of encashing the bill with the bank is called discounting the bill
  • The bank gets the amount from the drawee on the due date

Returning of the bill

  • When the Drawee pays the bill before its due date, It is termed as the retirement of a bill
  • It happens with the mutual understanding between the Drawer and the Drawee
  • To encourage Retiring of the bill, the holder allows some discount called Rebate on the bill amount from the date of retiring the bill to the maturity

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