Bill Discounting:
When the seller sells goods on credit, he gets payment from the buyer after the credit period is over. In the meanwhile he may need funds for working capital purposes. So he draws a Bill of Exchange on the buyer which accepts and returns it to the seller. The seller may discount the bill immediately with is banker or may choose to wait till the date of maturity. In the former case, seller gets funds minus a discount immediately from the banker. The banker receives the amount of the bill from the drawee on the date of maturity of the bill. This process of providing finance is called discounting of bills.
