The bill market scheme is a right step in the right direction. Over the years, the functioning of the scheme has been quite encouraging.
The outstanding level of bills rediscounted under the scheme increased considerably from Rs. 10 crore at the end of June 1971 to Rs. 110 crore at the end of March 1980. But, the scheme has been subjected to criticism due to its various defects:
(i) The scheme has been generally used by the banks and their borrowers to offset the credit control measures of the Reserve bank.
Whenever the Reserve Bank tried to control the bank credit without restricting the bill rediscounting facility, the banks increasingly utilised this facility.
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This made the Reserve Bank’s tight money policy ineffective. As a result, the Reserve Bank was forced first to put restrictions on the bill rediscounting facility, and then to allow the facility wholly on its discretion.
(ii) The bill market scheme has not been successful in developing a genuine bill market. The main reason is that the borrowers as well as the banks still have preference for cash credit and dislike for bill finance.
(iii) The scheme is restricted to banks and some selected financial institutions. It has not been able to cover the indigenous bankers and other constituents of unorganised sector of the Indian money market.
(iv) The scheme has remained mainly concentrated in the fields of industry, trade and commerce. It has not been extended to agricultural sector.