Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled. They can be cash (currency), evidence of an ownership interest in an entity or a contractual right to receive or deliver in the form of currency (forex); debt ( bonds , loans ); equity ( shares ); or derivatives ( options , futures , forwards ).
5-486: A hundi or hundee is a financial instrument that was developed in Medieval India for use in trade and credit transactions. Hundis are used as a form of remittance instrument to transfer money from place to place, as a form of credit instrument or IOU to borrow money and as a bill of exchange in trade transactions. The Reserve Bank of India describes the hundi as "an unconditional order in writing made by
10-420: A financial asset of one entity and a financial liability or equity instrument of another entity". Financial instruments may be categorized by " asset class " depending on whether they are foreign exchange-based (reflecting foreign exchange instruments and transactions), equity-based (reflecting ownership of the issuing entity) or debt-based (reflecting a loan the investor has made to the issuing entity). If
15-588: A person directing another to pay a certain sum of money to a person named in the order." Hundis have a very long history in India. Written records show their use at least as far back as the Twelfth century. The merchant Banarasi Das Belonging to the Digambara Jain Sect , born 1586, received a hundi for 200 rupees from his father to enable him to borrow money to start trading. During the colonial era,
20-554: The British government regarded the hundi system as indigenous or traditional, but not informal. They were reluctant to interfere with it as it formed such an important part of the Indian economy and they also wished to tax the transactions taking place within the system. Official hundi forms were produced incorporating revenue stamps bearing the image of British monarchs, including Queen Victoria, and disputes between merchants often entered
25-460: The court system, so in no way was the system an underground one even though it did not take place through normal banking channels. There are few other varieties; the Nam-jog hundi, Dhani-jog hundi, Jawabee hundi, Jokhami hundi, Firman-jog hundi, etc. Financial instrument International Accounting Standards IAS 32 and 39 define a financial instrument as "any contract that gives rise to
#29970