Question

Among the following options, which one can lead to an immediate outflow of funds from the bank?

Q: Answer-Among the following options, which one can lead to an immediate outflow of funds from the bank?

Bill discounting is a type of short-term borrowing facility provided by banks to businesses. In bill discounting, the bank purchases the bills or invoices of a business at a discounted value before their maturity. The bank pays the discounted amount to the business, and the business receives immediate funds. However, this transaction also leads to an immediate outflow from the bank as they provide funds to the business based on the discounted value of the bills.