Professional Documents
Culture Documents
Concept
• B/E used in normal business activities
• Short-term financing
• Finances genuine trade transactions
• Money market instrument
Definition
• Indian Negotiable Instruments Act 1881
“Bill of Exchange is 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 to the bearer of that
instrument.”
Features
• Written instrument
• Negotiable instrument
• Discounting facility
• Making B/E
Types
• Demand bills
– Payable at sight
– No due date
• Usance bills
– Time-based
• Documentary bills
– Accompanied by documents
– Railway receipt, Lorry receipt
– 2 types- D/A bills & D/P bills
D/A & D/P
D/A bills
Document against Acceptance
Deliver documents on acceptance to drawee
It then becomes clean bills
D/P bills
Document against Payment
Deliver documents on payment by drawee
Drawee’s bank holds the documents
Contd……..
• Clean bills
– No documents
– High interest charges
• Inland bills
– Drawn on Indian residents
– Can be endorsed in foreign country
Contd……..
• Foreign bill
– Payable outside India
– Drawn in India payable outside India
– Drawn outside India & payable in India by party outside
India
– Drawn outside India & payable outside India by Indian
resident
– Drawn outside India & payable outside India by party
outside India
– 2 types- Export bill & Import bill
Contd……..
Export bill
Drawn by exporters on party outside India
Drawer Indian
Drawee foreigner
Import bill
Drawn by exporters outside India on importers in India
Drawer foreigner
Drawee Indian
Contd……..
• Accommodation bills
– Kite bills/ wind bills
– No genuine trade transaction
– Mutual financing arrangement
– Parties draw bills on each other
“An arrangement where an accommodating party
accepts the bill free of any consideration, to
accommodate another person to help that person
tide over temporary cash mismatches”
• Supply bills
– Drawn by supplier/ contractor
– On govt/ semi-govt department
– For supplies
– Since these are not accepted by govt departments they are not
negotiable
– Supplier can obtain advance
• Hundis
– Indigenous B/E & promissory notes
– Agriculture & inland trade
– Handled by indigenous bankers