Question

How is discounting of a bill of exchange a form of bank lending?

Answer 1

1. Discounting a bill of exchange is a type of bank lending in which the bank advances the value of the bill to the holder before its maturity date while deducting a discount fee (interest) for the service.
2. When the bill matures, the bank takes the full amount from the drawee, thereby giving the holder a short-term loan.