What's The Difference Between "Negotiation" And "Discounting" In Terms Of A L/C?


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Negotiation of documents implies the LC is available by negotiation and a bank has paid the amount on any day prior to the due date of the bill under LC. A negotiating bank has recourse to the drawer of the bill.

Discounting implies a usance bill due on a future day is prepaid after deduction of the interest till the period it is due. Discounting is usually done on the basis of a facility agreement which gives the financing banker recourse to the drawer.

Discounting can be done for both LC and non LC bills. Negotiation can only be done on bills under LC available by negotiation

Bishnu Pandey

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