Bills
The finance against bills is meant to finance the actual sale transactions. The finance against bills can be in any of the below mentioned form:
Purchase of bills by the bank if these are payable ‘on demand’.
Discounting of bills by the bank if these are usance (or time) bills.
Advance against bills under collection from the drawees, whether sent for realisation through the bank or sent directly by the drawer to the drawees.
A unique kind of facility under this head is advances against bills drawn on public sector undertakings / government departments which do not accept bills. In such cases, pre-receipted challans are submitted by the borrower to the bank as an evidence for availing finance there against (a pre-receipted challan establishes genuine movement of goods and ensures that the funds of the bank are used for sanctioned purposes only). This facility is commonly known in the banking sector as ‘government bills facility’ or ‘supply bills facility’. It may also be mentioned that the purchase / discounting of bills may be either under a letter of credit or without a letter of credit. In case of dishonour of bills, banks have the
right to recover the amount from the drawer with penalty, additional interest, etc.
Bills may be either ‘documentary’, i.e., accompanied by the original documents of title to the goods, or ‘clean’, i.e., without the original documents of title to the goods. In the case of documentary bills, the bank releases the documents of title to the drawee only against payment (in the case of demand bills purchased) or against acceptance (in the case of usance bills discounted). On release of documents of title after acceptance of usance bills, these also assume the nature of clean bills.
The RBI has issued guidelines for regulation of discounting and rediscounting of bills (Ref. Master Circular No. DBR.No.Dir.BC.10/13.03.00/
2015-16, dated July 01, 2015, “Loans and Advances-Statutory and other Restrictions”.