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March 26, 2013

Hundi Discounting

Hundies were also traditionally used to finance the movement of agricultural produce. Hundies were, like Bill of Exchange, drawn and payable at sight (Darshani Hundi) or payable after a stipulated period mentioned in the Hundi (Muddati Hundi) and were used to raise money, remit funds and finance inland trade.
These Hundies were even got discounted with the commercial banks on the basis of the creditworthiness of indigenous bankers. However, with the development of organised financial markets over the years, and the spread of commercial banking, the role of the indigenous bankers in the financial system diminished in importance and Hundies too gradually started losing their status as the principal instrument of credit and were replaced by Bill of Exchange in the present form.

Hundi is nothing but Bills of Exchange.

Whenever the seller sells the goods on credit under bill of exchange (Hundi), he will send hundi to his buyer for its acceptance.

Once the goods are dispatched and all the conditions are under Hundi are fullfilled, the required documents alongwith Hundi is submitted to the bank for its discounting. Banker after deducting his discounting charges will credit the account of seller.
Seller raises>Gets accepted from buyer>Seller get is Discounted from banker.  

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