A developed bill market is useful to the borrowers, creditors and to financial and monetary system as a whole. The bill market scheme will go a long way to develop the bill market in the country. The following are various advantages of developed bill markets.

(i) Bill finance is better than cash credit. Bills are self-liquidating and the date of repayment of a bank’s loans through discounting or rediscounting is certain.

(ii) Bills provide greater liquidity to their holders because they can be shifted to others in the market in case of need for cash.

(iii) A developed bill market is also useful to the banks is case of emergency. In the absence of such a market, the banks in need of cash have to depend either on call money market or on the Reserve Bank’s loan window.

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(iv) The commercial bill rate is much higher than the treasury bill rate. Thus, the commercial banks and other financial institutions with short-term surplus funds find in bills an attractive source of both liquidity as well as profit.

(v) A development bill market is also useful for the borrowers. The bills are time-bound, can be sold in the market and carry the additional security in the form of acceptor’s signature. Therefore, for the borrowers, the post of bill finane is lower than that of cash credit.

(vi) A developed bill market makes the monetary system of the country more elastic. Whenever the economy requires more cash, the banks can get the bills rediscounted from the Reserve Bank and thus can increase the money supply.

(vii) Development of the bill market will also make the monetary control measures, as adopted by the Reserve Bank, more effective.

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As pointed out by the Narasimhan Study Group, “the evolution of the bill market will also make the Bank Rate variation by the Reserve Bank a more effective weapon of monetary control as the impact of any such changes could be transmitted through this sensitive market to the rest of the banking system.”