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 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 little as 2 weeks, while some others may have a usance period of up to 2 months. Usance usually applies to items or goods purchased on credit.
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. The date of maturity, when the payment needs to be made may be at a date -
- After the person accepting the draft accepts the draft.
- 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.