Types of Bills of Exchange
There are 9 types of bills of exchange that are mentioned below with their details:
Documentary Bill
The pertinent documents that attest to the legitimacy of the sale or other transactions between the seller and the buyer are annexed to this kind of bill of exchange. They are categorized into 2 types:
- Documents against payments: The payment is to be made to the bank when the buyer is presented with the draft and before any kind of shipping document is released.
- Documents against acceptance: The importer has to pay on a specified date and once the buyer has accepted the time draft, the bank releases the documents to the buyer.
Demand Bill
This invoice must be paid in full right away. The bill must be paid whenever it is presented because there is no set due date for it. This payment can be made as and when the bill is presented.
Usance Bill
These bills are time bound in which the payments must be paid within the given duration of time. It is also known as a time-bound bill.
Inland bill
They can only be paid in the country in which it is issued; they cannot be paid abroad. The foreign bill is the opposite of this one. For example, the bill of exchange drawn in India should be paid in India only.
Clean Bill
Because this bill lacks any supporting documentation, its interest rate is higher than that of the other bills. These bills levy a higher interest rate than other documented bills since no form of the document is involved in issuing them.
Foreign Bill
A bill that is paid outside of India. Different types of rules and regulations are implied on these bills as compared to other bills. Two types of foreign bills are:
- Export Bill- It is a bill of exchange that is drawn by an exporter for a party that resides outside Indian waters.
- Import Bill- A bill of exchange that is drawn by exporters outside India for Indian importers.
Accommodation bill
It refers to a situation where no trade transactions of the goods or the services take place but is used as an agreement between the two parties to give each other some financial assistance known as an accommodation bill.
Trade Bill
A bill of exchange is drawn with the intention of setting some credit trade transaction and is then accepted as a trade bill. It is mostly between buyer and seller, who allow the buyer to make a credit kind of purchase.
Supply Bill
This bill is taken by contractors and suppliers from government agencies. The goods are supplied by the government bodies by a contractor or supplier and the bill is drawn.
Bills of Exchange
A bill of exchange is a sort of written order or notification used in trading that obligates one party to make a certain payment to another party either immediately on demand or at a predetermined duration of time. A bill of exchange is used also in international trading to facilitate transactions between importers and exporters.