Usance
Encyclopedia
Usance refers to the utilization of economic goods to satisfy needs. In manufacturing, "usance" means "inputs." It is used in "usance bills." This terminology is used in banks in India, when dealing with forex.

In medieval banking, "usance" denoted the period of time, set by custom, before a bill of exchange could be redeemed at its destination.

In today's Financial World, the term usance denotes the period of time between the date of the bill and the payment of the bill, which is allowed by law. Usance differs from country to country. Some countries may have a usance period of as less as 2 weeks, while some others may have a usance period of upto 2 months. Usance usually applies to items or goods purchased on credit.

Usance may also mean the interest that will be charged on the person who has borrowed some amount of money. Thus, usance here means the profits earned from the lending of principal
Principal
- Education :*Principal , a head of a primary or secondary school*Principal , a chief executive of a university or college- Law :*Principal , a person who authorises an agent...

.

Usance as a Bill of Exchange

One of the major uses of Usance Bills is in Bills of Exchange. Usance drafts are used in arrangements where Deferred Payments are used. In Such a case, the payment is made on a particular date in the future, which is determined in the future according to the Letter of Credit
Letter of credit
A standard, commercial letter of credit is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking....

. The date of maturity
Maturity (finance)
In finance, maturity or maturity date refers to the final payment date of a loan or other financial instrument, at which point the principal is due to be paid....

, when the payment needs to be made may be at a date -
  1. After the person accepting the draft accepts the draft.
  2. At a specific pre-determined date in the future.


In some case, when there is no particular fixed date, the acceptor may refuse to accept the draft, thus extending the date of maturity.
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