Bill Discounting - Explained in Hindi - YouTube

Subscribe to the Asset Yogi channel and press the bell icon

To watch the latest finance videos above all

Music

Namaskar, my name is Mukul

And you are welcome to the Asset Yogi

Where we unlock the knowledge of finance

In this video, we are going to talk about Bill Discounting

Or we can also say discounting of the bill of exchange

I have already made a detailed video on what is a bill of exchange

If you haven't watched that video, then watch it. I'll provide the link in the

description. Then also if we want to summarise the bill of exchange

So it is a type of a financial instrument

which is used in international trade.

Assume the buyer doesn't have sufficient funds to pay the seller

In the situations like these, it is a type of credit facility

which is given by the seller to the buyer through Bill of Exchange

But sometimes the seller himself faces problems related to the funds

Until he doesn't get money from the buyer

How will he manage his expenses till then?

In this case, a concept of bill discounting is introduced

Through which the funds can be raised.

The seller can raise his funds

So in this video, we will understand this concept in detail

And we will see what type of interest is charged and

how does this whole concept work?

So stay tuned with the video till the end

Let's go straight towards the blackboard

Let's understand the concept of bill discounting with the help of an example

We have already discussed this example in the video of the bill of exchange

So if you haven't watched that video of mine then watch it.

I have explained the bill of exchange in a detail

Let's review it quickly

Assume there is a buyer A and he wants goods from the seller B

So he says that I don't have funds right now

Give me the goods on the credit

So the seller gives him the goods on credit

in point of view of the old relationship

And says to sign a

bill of exchange

So the seller issues the bill of exchange in the name of buyer A

And the buyer accepts the bill of exchange

after signing it. Because the seller is giving the money

on credit or providing the goods on credit

So he becomes the creditor. And because he is drawing the bill of exchange

So we also call him a drawer or maker. Because buyer A is taking the credit

So becomes the debtor or we can also call him a drawee

Because the bill of exchange is being issued in its name.

And along with that, he is accepting the bill of exchange so we can also

call him acceptor. So this was the working of the bill of exchange in short

Assume the validity of the bill of exchange is of 90 days

Buyer A will give the money to the seller B after 3 months

During these three months, seller B's requirement of the working capital

He will require the funds in his business

He may require the fund immediately.

In such cases, seller B can go to the bank

And he will say to the bank that

this is my bill of exchange

I will endorse it in your name.

So this bill of exchange will be endorsed in the name of the bank.

And the seller will say that collect the payment of a bill of exchange from the buyer A

Assume the value of the bill of exchange

Let's say it is 10 lakhs Rs

The bank will not give the exact 10 lakhs to the seller.

It will give a little bit less money

We call this bill discounting.

Because the full amount of money is not given

It is given after discounting. How is the discounting done?

The banks say that the 10 lakhs Rs that I am giving you immediately

I will charge an interest of 90 days from you on this

So assume the total value is 10 lakhs Rs

Let's say the interest rate the bank says

that it will charge 10%

So this interest rate is also called discounting charge

So this interest will be calculated for 90 days.

Let's quickly calculate

How much will be the interest for 90 days?

So for 90 days, it will be 3 months

3/12, we will do 3/12 because it is 10% for 12 months

3/12×10, because it is 10% so we will write 0.1

So we will write 3/12×0.1×1000000. So this value will be 25000 and it is being calculated on 10 lakhs Rs

One zero is extra here.

So the value is 25000

The interest will be charged.

So here, if we subtract 25,000 from 10,00,000

The creditor will get this much amount or the seller will get it.

So the value here is 975000

So 9.75 lakhs

The bank will give it to the seller.

And it will collect the money from the buyer.

So the bill of exchange will be presented to the buyer. And

he will get 10 lakhs Rs here after 90 days

So the bill of exchange on the date of maturity

I will write it down here.

So whatever day will be the maturity date, the bill of exchange will

be presented to buyer A and the bank will get 10 lakhs Rs.

And the fees of 25000 Rs of the bank

The bank will earn this money as interest.

Because the seller doesn't get the full amount

He gets it after discounting which are basically the discounting charges.

We call this bill discounting

The different banks can set different conditions

It's not like they give money to the seller after discounting

the bill of exchange or the promissory notes

For example, some banks may have certain conditions

like the bill should be the usance bill which has fixed maturity date

So basically the demand bill doesn't have a fixed date

We don't know when the seller will present it.

Sometimes the bank does not discount

such bills.

After this, the bill should be accepted

by the drawee

We talked about acceptance here. Until the bill doesn't get accepted

It cannot be financed. This means it cannot be discounted.

Drawer, drawee, or any other endorsee. Assume the drawer endorse it to

the third party. Let's say another party C is involved here

And C would approach the bank.

So all the parties whether it is seller, buyer, or endorsee

All these should be reputable individuals, companies, or banks.

Otherwise, if they are not reputable individuals or known individuals

Then it will be a quite big risk for the bank. So maybe the bank will not discount such

individuals. Some banks can set the condition

that the bill should be a trade bill. So the bank can set these types of conditions

Mainly the bill discounting means the money

that the seller is not getting immediately

He will get it after 90 days.

So if he wants the money immediately. Then he can approach the bank

and can get the money by discounting the bill.

If you liked this video then like it

And share it with your friends and family members

So that they will also get the benefit of this video.

If you have any suggestions or you want to give any feedback

regarding the video or the channel or if you want to suggest any topic for the future videos

Then you can comment below.

I keep coming up with interesting and informative videos related to finance and investment

To get the notification of the latest video subscribe to the channel

And press the bell icon.

So let's meet in the next video

Till then keep learning, keep earning

And be happy