BANKING AFFAIRS

Detailed explanation-1: -Under this type of lending, Bank takes the bill drawn by borrower on his (borrower’s) customer and pay him immediately deducting some amount as discount/commission. The Bank then presents the Bill to the borrower’s customer on the due date of the Bill and collects the total amount.

Detailed explanation-2: -A rediscount occurs when a short-term negotiable debt instrument is discounted for a second time. The reason an issuer would do this is to spark demand for loans when investor interest dries up. When liquidity in the market is low, banks can thus try to raise capital by rediscounting.

Detailed explanation-3: -The drawer may discount the bill with the bank before the due date. The bank charges discounting charges from the drawer at a certain rate. Thus, at the time of discounting the bank deposits the net amount after charging such amount of discount in the account of the holder of the bill.