Bills Of

Exchange
BY
RANJITH KUMAR.
 Introduction

 Bills Of Exchange
 According to section 5 of Negotiable
Instrument Act,
 “A Bill Of Exchanges are financial
documents that are required an
individual or company that is addressed
in the documents to pay certain amount
of money on specified date that is cited
in the text of the document, is draft”
 Specimen Of A Bill Of
Exchange

.
 Special features
1. A Bill Of Exchange is an instrument in writing
2. It must be signed by the maker
3. It contains an unconditional order
4. The order must be to pay money and money only
5. The sum payable must be specific
6. The amount must be paid within a stipulated time
7. The name of the drawee must be clearly mentioned
8. It must be dated and stamped
 Advantages of Bill of
Exchange
1. A Bill of Exchange is used in settlement
of debts
2. It fixes the date of payment
3. It is a written and signed
acknowledgement of debt
4. A debtor enjoys full period of credit
5. A drawer can convert the bill into cash
by getting it discounted with the bank
 BILLS OF DISCOUNTING
 The Bank buys the bill (i.e. Bill of
Exchange or Promissory Note)
before it is due and credits the value
of the bill after a discount charge to
the customer's account.
 The transaction is practically an
advance against the security of the
bill and the discount represents the
interest on the advance from the
date of purchase of the bill until it
is due for payment.
 The Bank may want some
conditions to be fulfilled to be able
to discount a bill:
 It must have been accepted and bear
at least two good signatures (e.g. of
reputable individuals, companies or
banks etc.
 The Bank will normally only

discount trade bills

Thank You