Hundi

Thanks for the query, Shivani,

There is already enough material available on the net to understand hundi, however you may try,
https://en.m.wikipedia.org/wiki/Hundi

Hundis are India originated Bills of exchange, hope you have an idea about BOEs, they are used as an instrument equivalent to money, the guarantee or rather promise is given by a person how signs it and returns back to the writer of the hundi, not going into the type of hundi, it basically is a paper telling that the person mentioned and signed will pay mentioned money to the other person within or at a specific point in time.

Now, say Mr. Tata signs a hundi saying that he will pay you Rs. 100000 on 31.12.2017, that since Mr. Tata enjoy a great credibility in the market you can trade against such hundi, such as you can go to a bank and ask for money against the hundi or go to tata motors and ask for a vehicle against that hundi, though the will honor the hundi but also they will charge a fees for that basically interest amount that they have lost since Mr. Tata will only pay after a year.
You will transfer the hundi in the name of bank or tata motors saying "The money shall be paid to the Bank/Motors Co. in place of me" sign it stamp it and you will get the money against that hundi.

Hope you get an idea about hundi already,
Please do go to wiki it will really help, for any other issue please revert,

Thanks,
Abhimanyu

Hindi name of Negotiable Instrument.... Various types of Hundi are there...

Hindi name of Negotiable Instrument.... Various types of Hundi are there...

Hindi name of Negotiable Instrument.... Various types of Hundi are there...

Dear Karan

Hundis are not covered by Negotiable Instruments Act.

 

Dear Abhimanyu

Thanks again

Dear Friends

I have a question regarding bills of exchange.

Are they still in practice?

Is there a specific format for a Bill of Exchange?

Can anyone please the share the format, if any?

regards

Thanks for reverting,

Yes, they surly are operative but since the finance sector is flourished here and business is now so deep and beyond boundaries of city state and nations it would be hard to counter any BOE without bank being involved in it.
For eg. if I want to trade with you and say I am a novice to the arena and you are an established brand how would you rely on mine accepted BOE for say Rs.500000 it is risky and hence you would ask to get it countersigned by bank so that if I fail to pay your money is secured by the bank.
This is often called as BG or Bank Guarantee mostly used now a days including in international trade, govt. tenders etc.
The unofficial version however is still there, since India is huge, there are places where it is used for security purposes since there is less transportation of cash involved, there is possibility to reduce tax(black money/hawala) there is trust generated between parties through decades old business relationships that one can trust another.
You will find these in agricultural sector, maybe in small business or alike, otherwise BOEs are now routed through banking institutions or in some cases governments too play the role of a bank.

No, I don't think that there is a specific format, however, I have seen a set format followed by almost in all BOEs,
There are a few essential elements of a BOE which include, Names and details of parties, dates, amount, period, conditions, if any, type of BOE, etc. Stamping as per Revenue rules is required (I think if the amount is above Rs. 5000) so that it is legally enforced in case of dishonor of the instrument.
Though let other contribute, if RBI rules notify any set format, though I doubt it.

Hope it helps you, in case of further issues please revert,

Thanks,
Abhimanyu

Yes bills of exchange are used however often secured by a letter of credit or a bank guarantee as the case may be.

As mentioned above there is no legal set format of a boe , it must contain all essential details without which the bank may reject it.

Hundi have verious meanings in local language . however in commerce, its just called unofficial "promisory note" .

at certain places, the cash box is called hundi .

some places the donation boxes at temples are also called hundi .

but in general, its part of billing system of payment through third party ( agent) who discharge the payment to company immediately on billing and later on the agent is authorized with "hundi" issued by the company and accepted by the buyer. .

hundi borrowing is also a type of  getting short term borrowing (loan) aginast some  promise/surity/ security for  very short  term, and usually in practise at  wholesale markets, where the  wholeseller takes short term loan in CASH, signs hundi  and  pay back  on  very  short  time,  with the  terms and interest as mentioned in hundi,  

under money laudering rules hundi is  illegal,  but  still some people  keep it  in practice,  

a history of  hundi  at  wiki  https://en.wikipedia.org/wiki/Hundi

Dear Abhimanyu

I could not understand the black money hawala part you wrote. Can you please explain?

 

Dear U S Sharma

I could not understand the following part you wrote:

"and later on the agent is authorized with "hundi" issued by the company and accepted by the buyer"

 

Also a question to both of you, if hundi is illegal then why is it existing and why is bank giving money by discounting it.

 

Regards

@ shivani

Hundi word has been used for  many instances and instruments, most of them got renemed and their new  version set of  words are in practice 

Here to the topic 

People use the term HUNDI(old name) for promissiory note (new name), promissory note is legal. 

it is usually executed  bny mills to get payment  from  buyers  through  their  dealers 

PN is executed by Mills,  annexed with their invoices,  under which it is clearly mentioned that after the Credit  period, the  buyer ( receipent of goods)  will pay  the amount of  invoice, to  "dealer" ............  

delear has  certain deposits  and  arrangements of credit  with mills  to get the goods for  buyer, 

PN is  an  negotiable intrument  for  banking and non banking institutions. 

Dear US Sharma

As i am not aware of Mills and how they get their payment.

I tried hard to understand but got confused.

Mill sells to dealers so why will it give promissory note. Mill is the one who gets payment from dealer, isnt it? Or are teh dealer sells teh goods to mill? I am all confused here.

please explain by giving a quick example.

 

regards

shivani

Dealers are authorised  agents  of mills to sell  goods on behalf of mills 

mills does not raise invoice to  dealers, but  invoice is  raised to the  buyer  direct

payment is received by dealer, and  dealer send  the  payment  in collective mode to mills 

the instrument, which is used to authorise the dealer  to  collect the payment on behalf of mills, is a Promissiory Note, where the  mill authorize the  dealer to collect payment from buyer on behalf of  mill,  .............the  buyer signs the same also on  receipt of  invoice ( bill)  with accepting the  term with promise to pay on due  date as mentioned in PN 

PN is  called hundi in common  people  language.