by • 17/06/2011 • 2nd year BankingComments (0)2011

The bill may be classified as follows:

i)                    Bills by place

ii)                  Bills by time

iii)                Kinds by documents

iv)                Other kinds

These kinds explain when, Where and how the bills are drawn and paid.

I.          Kinds of Bills by Place: Such bills can be further divided into following kinds.


1.         Inland Bill: These bills are also known as hundis. These are drawn and paid within a country. However, if the drawer and the drawee are in the same country but the payee resides in a foreign country, the bill will still be an inland bill.

2.         Foreign Bill: When the drawer of the bill is in one country and the drawee in another, the bill is known as a foreign bill.

3.         Bills in Sets: Sometimes foreign bills are made in sets i.e more than once in numbers and sent by post to the drawee for acceptance. If one or more bills are lost on way the rest may reach their destination. If, in such a case, one bill is accepted and paid the rest of the bills will automatically become invalid. Bills in sets are used to avoid any delay arising out of their missing on the way to the drawee.

II.         Kinds by Time: The bill of exchange may be divided on the basis of time, that is, when they are paid. In this sense they are subdivided as follows.

1.         Demand or Sight Bill: This bill is payable on demand or on sight. It is also known as “darshani hundi”. Such bills are payable immediately and do not contain a particular or specified period of time.

2.         Time Bill: They are issued for a definite period of time and payable on the maturity or expiry of that period mentioned therein. Such bills usually carry three months period plus three days as grace time.

III.        Kinds by Documents: Document-wise the bill of exchange may be divided as follows:

1.         Documentary Bill: Such bills carry with them documents like railway receipt, insurance receipt, bill of lading, mate’s and captains receipts and the like.

Documentary bills are further subdivided as follows:

  1. Document bill against payment: These bills are only paid when the necessary documents are issued and presented. They are also referred to as D/P Bills.
  2. Documentary bill against acceptance: Such bills are only accepted when documents are released by the drawer.

2.         Clean or Non-Documentary Bill: There are times when the bill is drawn and accepted without being attached with the documents of exports. Such bills are known as clean or non-documentary bills.

IV.       Kinds by Payments: The bill of exchange can be categorized on the types of payment which are as follows:

1.         Bearer Bill: These bills are payable to any person who bears or carries them. There is no restriction as to who should get the payment against the bill.

2.         Order Bill: The payment of the bill is restricted to the person whose name has been mentioned in the bill.

V.        Other Kinds: Other kinds of the bill are as follows:

1.         Trade bill: It is an ordinary and most common type of bill of exchange used in business transactions. It is drawn by the seller (CR) against the buyer (Dr) of goods.

2.         Accommodation Bill:            These bills are drawn in order to borrow certain sum of money. The bill is not the result of a business transaction. Its main objective is, as its name suggests, to accommodate or do a favor to the drawer.

Suppose, A wants to borrow some amount of money form B but B is not in a position to lend it to A. However, he asks A to draw a bill of exchange, for the amount he needs, in the name of B and then he (B) accepts the bills. Now A will go to a bank and get it discounted and thus A receives money that he needed such a facility used by A is referred to as an accommodation bill. At the time of maturity A will pay off the amount to b, and B will finally pay it off the bank and thus the transaction will be settled.



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