Question

Mohit goes to the bank with a credit instrument which is due three months later. The bank charges some commission and pays less than the face value of the instrument.

Identify the kind of loan granted by the commercial bank.

Options

• Term loan

• Cash credit

• Discounting of bills of exchange

• Overdraft

Answer 1

Discounting of bills of exchange

Explanation:

Mohit takes a bill to the bank that will be paid in three months, but he needs cash now. The bank gives him money after deducting a small commission-this process is called discounting of bills of exchange.