XII Banking - Question 9 - Credit Instruments

Q.9(A). Define Credit Instruments.

Q.9(B). Define the different kinds of Credit Instruments.


CREDIT INSTRUMENTS

Credit Instruments are the documents describing details of credit and debit. Credit Instruments provide a written means fro future reference describing terms and conditions of any debt and loan. Credit Instruments may be an order for payment of money to a specified person or it may be a promise to pay the loan. Credit Instruments generally in use are cheques, bills of exchanges, bank overdraft etc.


KINDS OF CREDIT INSTRUMENTS

There are two broad kinds of Credit Instruments.


1. Negotiable Instruments

According to the negotiable instruments Act under Section 13-A, A negotiable instrument means a cheque promissory note and a bill of exchange which are payable to the bearer of the instrument or the person to be ordered.


Features of Negotiable Instruments

i. It must be unconditional

ii. It must be in writing

iii. It is payable on demand or the period for the payment which is determined.


2. Non-Negotiable Instruments

Non-Negotiable Instruments can not be transferred or the documents which are restricted to transfer by the issuer e.g. Money Order, Postal Order, Shares Certificate etc. Such documents appears at the name of the beneficiary and the payments are made only to those persons to whom the instruments are made payable.