Rediscount is a way of providing financing to a bank

Bank

A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...

 or other financial institution

Financial institution

In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...

. Especially in the 19th century and early 20th century banks made loan

Loan

A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....

s to their customers by "discounting" the customer's note. The note is a paper document, in a specified form, where the borrower promises to repay a certain amount at a specified date.

Let's say the customer wants to borrow $1000. The bank may ask him to sign a note promising to repay $1100 in one year. The bank is "discounting" the note by paying less than the $1100 face amount. The extra $100 is of course the bank's compensation

Payment

A payment is the transfer of wealth from one party to another. A payment is usually made in exchange for the provision of goods, services or both, or to fulfill a legal obligation....

 for paying before the note matures. The Federal Reserve System

Federal Reserve System

The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907...

could provide financing by "rediscounting" this note. Maybe the Fed would give the bank $1050 for the note.