Features of a Negotiable Instrument

1. It is a written document

2. A negotiable Instrument payable to bearer is transferable merely by delivery whereas a Negotiable Instrument payable to order is transferable by endorsement and delivery.

3. The holder of a Negotiable Instrument can sue upon it in his own name.

4. Its works in the same manner as money and like money it may also be transferred from one person to another.

5. The Transferor does not need to give notice to any person at the time of transferring the Instrument.

6. It is the simplest and most convenient mode of assignment of a debt.

7. The tittle to the Instrument received by a bonafide transferee is not affected by defect in the title of the transferor.

A. Negotiable Instruments

1. Promissory note

2. Bill of exchange

3. Cheque

4. Exchequer bill

5. Circular note

6. Dividend warrant

7. Share warrant

8. Bearer debenture

9. Bank note

10. Bank draft

B. Non Negotiable Instruments

1. Money order

2. Postal order

3. Deposit receipt

4. Share certificate

C. Quasi Negotiable Instruments

1. Bill of lading

2. Dock warrant

3. Carriers receipt

4. Letters of credit

5. Railway receipt

Types of Negotiable Instruments

According to the negotiable Instruments act 1881 there are just three types of Negotiable Instruments example promissory note, bill of exchange and cheque. However many other documents have also been recognized as negotiable instruments on the basis of custom and usage like treasury bills, share warrant etc. They posses the features of Negotiability

Promissory note

            A promissory note is an Instrument in writing containing an unconditional undertaking signed by the maker to pay a certain sum of money to or to the other of a certain person.  This type of a document is called a promissory note.

Features of promissory note

1. A promissory note is unconditional

2. It is always in writing a verbal promise to pay a specified sum of money is not a promissory note.

3. It is made and signed by the debtor.

4. A promissory note is made as payable in the Currency of the  country

5. A promissory note drawn for a specified duration should be adequately stamped According to its value.

6. A promissory note should be drawn for the payment of a specified sum.

Bill of exchange

            A bill of exchange is an Instrument in writing, unconditional order signed by the maker directing a certain person to pay a certain sum of money only to or to the other of a certain person or to the bearer of the Instrument.

Features of bill of exchange

1. A bill must be in writing, duly signed by its drawer accepted by its drawee and properly stamped as per Indian stamp act.

2. It must contain an order to pay words like please pay rs.5000 on demand and oblige are not used.

3. The order must be unconditional.

4. The order must be to pay money and money alone.

5. The sum payable mentioned must be certain or capable of being made certain.

6. The parties to bill must be certain.

Banking Terms

Repo Rate: Repo rate means a purchase and sale of agreement. It is a contract to buy securities and then sell them back at an agreed future date and price. It is thus revenue for short term investment of surplus funds. From RBI point of view it is called a short term lending and from banks point of view it is called short term borrowing.

Reverse Repo rate :  Reverse Repo Rate is an instrument of borrowing funds for a short period and involves selling a security and simultaneously agreeing to repurchase it at a stated future date for slightly higher price. From RBI point of view it is called a short term borrowing and from banks point of view it is called a short term lending.

Group Company : As per RBI for the purpose of FDI, two or more enterprise which , directly or indirectly , are in position to exercise 26% or more of voting rights in other enterprise or appoint more than 50% of the members of the board of directors in the other enterprises.

Branch Vs Subsidiary: A subsidiary is a separate legal entity from the parent company, although owned by parent company, has a same legal identity as its parent company , from liability , on the other hand branch is not a separate legal entity of the parent company and liability wise there is no limit to the parents company’s liability , RBI has permitted to Foreign Banks to change from Branch Mode to the Wholly Owned Subsidiaries.

NFS (National Financial Switch): It facilitates interconnectivity between banks’ switches and interbank payment Gateway for authentication & routing the payment details of various E-commerce & E-Govt. activities (Retail Banking). Now NFS has been overtaken by NPCI (National Payment Corporation of India).

SLR (Statutory Liquidity Ratio): This is a minimum Reserve which every bank has to maintain with itself in the most liquid form to meet any demand of the depositors. Normally Government securities are purchased to maintain SLR.

Prime Lending Rate (PLR): The term originally indicates the rate of interest at which a bank lends to favored customers, i.e. those with high credibility, though this is no longer always the case. Some variable interest rates may be expressed as a percentage above or below prime rate.

Sub Prime Rate: In India when money is lent below the PLR is known as Sub Prime Rate whereas in USA when money is lent at rate above the PLR is known as Sub Prime rate.

Base Rate: As per recommendation of Mr. Deepak Mohanty of RBI to bring a complete transparency in Bank’s lending system, in Indian Banking system the loan were sanctioned to the large corporate houses even below the PLR and some time it were fixed very low without any justification. A Base rate recommends that no bank will lend any money below the base rate. With this there shall be no extra benefits to the large corporate houses. Base rate will be beneficial for the regulator RBI. Now all Banks will either lend at Base rate or will park money with RBI, under LAF system. Base rate has been implemented from 1^st july, 2010.