Definition of Rediscount:
A rediscount occurs when a short-term negotiable debt instrument is discounted for a second time. The reason an issuer would do this is to cause a spark demand for loans when investor interest dires up. When liquidity in the market is low, banks can thus try to raise capital by rediscounting.
The action of rediscounting something.
If a loan payment has already been reduced, a financial institution may reduce the payment amount further to satisfy the loan quicker.
A rediscount is also a method for commercial banks to obtain financing from a central bank.
(of a central bank) discount (a bill of exchange or similar instrument) that has already been discounted by a commercial bank.
How to use Rediscount in a sentence?
- Eligibility for rediscount at the Bank of England.
- The bank does not rediscount eligible bills back to the market in such cases.
- To rediscount refers to lowering the marketable value of a debt instrument for a second time, increasing the difference between the discount price and its par value.
- Rediscount can also refer to financing provided by central banks to banks, where the central bank will rediscount a discounted promissory note from a borrower to a bank to generate liquidity for the bank.
- Rediscounting is used to spark new demand among bond investors in order than firms can raise debt capital in otherwise pessimistic markets.
Meaning of Rediscount & Rediscount Definition