Explain Bills rediscounting.

Bill rediscounting Bill rediscounting means the rediscounting of trade bills, which have already been purchased by/discounted with the bank by the customers. These trade bills arise out of supply of goods/services. Bill rediscounting is a money market instrument where 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. Now, the bank which has discounted the bill may require getting it rediscounted with some other bank to get the fund. Features of Bill rediscounting are as under: The banks normally rediscount the bills that have already been discounted with them or raise usance promissory notes in convenient lots and maturities and rediscount them. Rediscount of bills should be for a minimum period of 15 days and for a maximum period of 90 days. Discount is calculated on Actual/365 days basis. The amount payable to the borrower is the principal amount less the discount/ interest. While discounting a bill the amount of discount is to be deducted at the time the bill is issued. The discount is rounded off to the nearest rupee. On maturity the borrower would repay the principal amount.