What Are Accepting And Discounting Bills Of Exchange, Transfer Of Money And Creation Of Credit Money?

Accepting and discounting bills of Exchange: - Bill of Exchange is a negotiable credit instrument used in home and foreign trade. Through it the buyer of goods is allowed a specified period, generally three months, for payment. The bank copies accept the bill on behalf of the debtor and discount it for the creditor. Discounting the bill refers to pay the cash at a discount before the bill becomes matured (due). Discounting process benefits all the parties involved in it VIZ. the banker, the drawer, and the drawee.

Transfer of Money: Commercial banks play a significant role in transferring money from one person, company, city or country to another. This service is reliable, quick, safe, and inexpensive. On the other hand if this service is performed by post office, it would be costly, time consuming, and risky, Now in the business world, money is transferred mostly by banks using cheque, pay order, drafts.

Creation of Credit Money: - when banks receive deposits and advance loans out of these deposits. Credit money is created. The whole banking system in country makes way to the creation of credit money. To keep it in limited the central bank regulates it by requiring all commercial scheduled banks to deposit with it a certain percentage of their deposits.

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