CREDIT: ESSENCE, PRINCIPLES AND FUNCTIONS

Abstract

In the modern economic system, with the development of market relations, the leading links in the economy began to be commercial banks, on whose activities depends the effective functioning of the state economy as a whole. The level of development of production, social infrastructure and the degree of development of society as a whole largely depends on how developed the banking sector of the state is. An important role in fulfilling the tasks is assigned to commercial banks, which can provide credit resources to enterprises and organizations, as well as citizens. Among the many categories of economics, credit can be considered among the most important, due to the unique role played by this economic phenomenon in the economic life not only of individual organizations, states, but society as a whole. The purpose of the article is to clarify the conceptual and categorical apparatus of the definition of "credit", its functions and principles of lending. The article examines the theoretical basis for determining the essence of the definition of "credit", its origin, functions and principles of lending, which highlighted the fact that credit is the most common form of raising funds in the banking market. It is determined that a bank loan is a form of credit in which money is lent by banks. Commercial banks licensed by the NBU are the main link in the credit system, they simultaneously act as a buyer and seller of temporarily available funds in society. In the system of economic relations, credit acts as an independent economic category. Thanks to credit, businesses have the opportunity to meet their economic needs to ensure the continuity of the processes of social reproduction, overcoming the limited financial resources. Credit relations allow businesses to increase their financial resources and expand production. The credit relationship between a banking institution and an entity is based on an analysis of the borrower’s financial condition. The main specific features of credit relations are: their emergence at the stage of redistribution of final income; formation on the basis of return and with the payment of interest; impact on the structure and volume of cash flows and features of the bank loan market.