BILLS REDISCOUNTING :

Bill redisounting means the rediscounting of trade bills, which have already been purchased by/discounted with the bank by the customers. These trade bills arise out of supply of goods/services. Bill rediscounting is a money market instrument where the bank buys the bill (i.e. Bill of Exchange or Promissory Note) before it is due and credits the value of the bill after a discount charge to the customer’s account. Now, the bank which has discounted the bill may require getting it ‘rediscounted’ with some other bank to get the fund.

Features

– The banks normally rediscount the bills that have already been discounted with them or raise usance promissory notes in convenient lots and maturities and rediscount them.

– Rediscount of bills should be for a minimum period of 15 days and for a maximum period of 90 days.

– Discount is calculated on Actual/365 days basis.

– The amount payable to the borrower is the principal amount less the discount/interest.

– While discounting a bill, the amount of discount is to be deducted at the time the bill is issued.

– The discount is rounded off to the nearest rupee.

– On maturity the borrower would repay the principal amount.