Question

Briefly discuss any two features of the following sources of finance available to an organisation in India.

Discounting of bills of exchange

Answer 1

The features of the discounting of bills of exchange are as follows:

• It is a short-term credit facility.
• Bills of exchange discounted with a bank/trader.
• It is discounted before the due date.
• The discounting charges are applicable.
• Original holder gets access to instant cash.
• The bank/trader recovers dues from the signatory of the bill on the due date.
• In case of default, the bank/trader approaches the original holder of the bill to recover the dues.