COMMERCIAL BILL MARKET

WHAT IS AN INDIAN MONEY

MARKET?

Call Money Market

Commercial Bill Market

Treasury Bill Market

Market for Certificate of

Deposits (CDs)Market for Commercial Papers

(CPs)

Short Term Loan Market

COMPONENTS

WHAT IS A COMMERCIAL BILL MARKET?

BILL OF EXCHANGE“An instrument in writing

containing an unconditional order, signed by the maker, directing a certain person

to pay a certain sum of money only to, or to the

order of a certain person  or not to the bearer of the

instrument”.

ORIGIN AND GROWTH OF BILL FINANCING

The origin and growth of bill financing took place in UK and USA.

For financing the movement of agricultural goods, an indigenous bills of exchange known as “hundi” has a long tradition of use in India.

Used to raise money by the indigenous bankers. There were two kinds of hundis – Darshani and Muddati.

Banks used to discount hundis on the basis of personal standing of indigenous bankers.

TYPES OF BILLS OF EXCHANGE

DEMAND AND USANCE BILLS.

CLEAN BILLS AND DOCUMENTARY BILLS.

INLAND AND FOREIGN BILLS.

EXPORT BILLS AND IMPORT BILLS.

INDIGENOUS BILLS.

ACCOMMODATION BILLS AND SUPPLY BILLS

.

PARTICIPANTS OF BILL OF EXCHANGE

Drawer AVAL

Drawee Acceptor

Endorser

Endorsee

TYPES OF TRANSFER OF BILL OF EXCHANGE

PAYMENT

ON MATURITY

BEFORE MATURITY

DOMICILE BILL NOTIFICATION RECOURSE

DISCOUNTING OF BILLS OF

EXCHANGE

BILL DISCOUNTINGSpecial form of lending.

Indicates the operation by means of which a bank, having previously deducted the interest, advances to its client .

Widely used source of short-term finance.

Refers to the service that the holder commercial.

Acceptance draft transfers his draft to bank for obtaining funds before the day ofdraft maturity.

THE GROUNDS FOR DISCOUNTING THE

BILLDiscounted before their maturity date.Written request addressed to the chairman of board by the drawer.

Before the bills can be discounted they are checked for juridical authenticity and legitimacy of the drawer

Pricing for bills discounting is determined basing on the bill discount rate and is specially agreed with the drawer for every separate bill.

Operations include epresentation of bills, application of conditions, dispatch of Bills to the concerned banks for collection and dispatch of unpaid bills to the notary for protest.

CHARGESThe minimum charge for bill discounting

tends to vary according to the credit-worthiness of the companies. The pricing

for billdiscounting is determined individually.

DISCOUNT RATEThe rate used in calculating the present value of

some future monetary amount.

DISCOUNT PERIODThe period between the date of

discounting and the future due date of the receivable.

DISCOUNTING FEEThe discount fee is the difference between the nominal value of bill of

exchange bought by the Bank from a client and the

sum credited to the client's bank account.

REDISCOUNTING OF BILLS OF EXCHANGE

(1) A ceiling on the proportion of receivables (75 per cent) .(2) Discretion to banks to sanction additional ad hoc

limits .(3) Stipulation on ratio of bill

acceptance to credit purchases (25

percent).(4) Setting up of the Discount and finance House of India (DFHI)

.(5) Reduction in the discount rate on usance bills. (6) Remission of

stamp duty on bills drawn on/made by/ in favour of bank / corporative bank.

USES OF COMMERCIAL BILLSLiquidity

Certainty of Payment

Ideal Investment

Simple Legal Remedy

High And Quick Yield

Easy Central Bank Control

UNDERDEVELOPMENT OF COMMERCIAL BILL

MARKET Absence of Bill Culture

Absence of Rediscounting Among Banks

Stamp Duty

Absence of Secondary Market:

Difficulty in Ascertaining Genuine Trade Bills

Absence of Acceptance Services

Limited Foreign Trade

Attitude of Banks

BILLS OF EXCHANGE-ECONOMIC VALUE

Originally, the bill of exchange served for exchange of currencies and for a safe transport of financial means for longer distances.

As concerns payment using a bill of exchange, there are two variants possible: Payment by a bill of exchange and payment

by means of bill of exchange. The most often is the bill of exchange

used as a security.

MEASURES TO DEVELOP THE BILLS MARKET

DONE BY

Paridhi Khaitan (22) Karishma Marfatia (30) Gaurangi Sambhoo (49) Natasha Shail (55) Rahul Singhania (56) Dhaval Gala (59)