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Bill of Exchange

>> Sunday, September 27, 2009

The bill of exchange is a most effective instrument in making international payments. A bill of exchange is an order in writing from the drawer (creditor) to the drawee (debtor) to pay the specified sum of money on demand or on some specified future date (usually three months). The creditor can discount the bill of exchange from his hanker for an amount less than its face value. The margin between the face value and the amount paid, by the bank is termed as 'bank discount'. The mechanism of foreign bill of exchange assumes that each international payment in one direction is matched by the equal payment in the opposite direction.

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