TRADE BILLS

Hokitika Guardian, 16 July 1932, Page 6

TRADE BILLS

A NEW DEPARTURE. SYDNEY, July 6. A cable from London relates that an attempt is to be made to finance internal trade more by means of (trade bills than has been done ill the recent past, notes a Sydney paper. Financing by overdrafts is now more favoured than financing by means of bills, having a currency of three or six mouths. Bills are discounted at about 3 per .cent, while overdraft rates are 5 pec cent. It was the custom of years gone by ..that .'internal trade as well as foreign, trade should have money provided "Ly -‘means of bills of exchange,, but,.gradually • the overdraft system came quire. and , more into vogue. -Jn Australia ftne bills were an important feature d trade,. and the fourth of the month was an important day. for it was then 5 tliap; billsbfell due for payment. High taxation bills of ®**. change, .gfive the first blow to the cus-, tom ‘of'financing in Australia through bilisf {Thej tax now amounts to 2s per £1$);,; but another reason also had its influence. ' Bankers found tlmt in pl nce of ma'ny <jf 'the*bills : being'memoir dutr date there were requests for renewals, and these requests were repeated when the renewals • became due. Hence the bankers considered that they, were virtually granting overdrafts at the rate charged for bills. So overdrafts weie *in place of bills. To the trader in Australia the overdraft has this that interest is charged only on/the daily balance, not on, the limit of the loan. The difference, in the .rate at which bills are discounted and the rate of., interest charged on overdrafts is not so great i„ Australia as it is in Great Britain. As the cable points out, the banks prefer the bill system, as it results in a continual turnover of funds, and makes •trade finance more liquid. Also, the banker, need not become so deeply m.jvokesd in a trader’s affairs as he plight be with an overdraft.