Difference between negotiation of documents against L/c and discounting of bills mainly with reference to recourse available to negotiating / discounting banks agaonst drawer ?
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
Thanks for clarification,
Once again would like to confirm, if in case of discounting recourse is available to financing banker.
In my opinion, banks buy the bill on "Net Present Value" basis with risk and responsibility against non-payment of bill. In this case, in my opinion, no recourse is available to financing banker.
Pl examine and confirm.