What do you mean by Bill Discounting and how it is different from Repurchase Agreement ?

Bill Discounting: Bill discounting is a short-term financing instrument where a company sells its trade receivables (bills of exchange or promissory notes) to a financial institution (like a bank or an investor) at a discounted value before their maturity date. The financial institution pays the company the discounted amount immediately and then collects the full amount from the debtor on the maturity date. This provides immediate liquidity to the company against its credit sales. Difference between Bill Discounting and Repurchase Agreement (Repo): Feature Bill Discounting Repurchase Agreement (Repo) Primary Users Generally used by companies (sellers of goods/services) to convert trade receivables into cash. Generally used by banks and financial institutions for short-term borrowing/lending. Underlying Instrument Purchase/sale bills (trade receivables like bills of exchange, promissory notes). Interest-bearing securities/bonds (e.g., government securities, corporate bonds). Nature of Transaction Outright sale of a bill at a discount. The ownership of the bill transfers to the discounter. Sale of securities with an agreement to repurchase them at a later date at a predetermined price (inclusive of interest). It's essentially a collateralized short-term loan. Duration Typically short-term, ranging from 30 days to 90 days. Often for overnight borrowing, but can extend for longer periods. Amount Paid Amount is paid by discounting the invoice value of the sale/purchase bill. Amount is paid on the basis of 'dirty price' (clean price + accrued interest) after applying an appropriate haircut (margin). Risk The discounter bears the credit risk of the debtor (unless it's with recourse). The seller (borrower) retains the credit risk of the underlying security, but the buyer (lender) has collateral.