Purchasing and discounting of bills, Financial Management

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Purchasing and discounting of bills is the most important, from in which a bank lends without any collateral security. Present day commerce is build upon credit. The seller draws a bill of exchange on the buyer of goods on credit. Such a bill may be either a clean bill or a documentary bill which is accompanied by documents of title to goods such as a railway receipt. The bank purchases the bills payable on demand and credits the customer's account with the amount of bill less discount. At the maturity of the bills, bank presents the bill to its accepted for payment. In case the bill discounted is dishonored by non-payment, the bank recovers the full amount of the bill from the customer along with expenses in that connection.


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