As any economic phenomenon, credit has boundaries within which its essence is realized. In the case of economic categories, the boundary is considered as a limit to the distribution of certain economic relations. The credit boundary is the limit of the relationship over the return value movement (within these boundaries the credit retains its essential features).
The development of credit relations beyond economic boundaries leads to their rebirth and distortion of the essence of credit. The external boundaries of credit relations are their qualitative separation in time and space from all other relations.
They conclude the whole set of credit relations, show the objective limits of their functioning, the place of the creditor in the economic relations of the society.
Internal boundaries show the permissible measure of the development of certain forms of credit (banking, commercial, state, consumer) within the external boundary of credit relations, i.e. shows the ratio of parts within a single whole.
The content of economically reasonable credit boundaries at the macro level is revealed by the concepts of creditworthiness of the borrower and liquidity of the bank.
Creditworthiness is the economic creditworthiness of an economic link.
The volume of credit investments for different firms has an economic limit, which is based on the principle of credit as a return. Hence the properties of the loan imply the need for mandatory repayment of the loan funds, as the borrower ‘s creditworthiness is limited by its ability to repay the loan.
Due to the fact that the main banking resources make up borrowed funds, the issuance of the latter on credit is objectively limited, as these funds the bank must return to clients within the specified terms. Therefore, the amount and structure of the bank loan, i.e. the limits of lending at the bank level, is determined by its ability to ensure timely repayment of its obligations.
Bank loans (CB) and their quantitative characteristics are established by the Central Bank in the form of economic norms, as a violation of credit boundaries negatively affects the stability of monetary turnover and may have various consequences.
The concept of the role of economic categories characterizes the concrete manifestation of their functions in these socio-economic conditions. The role of credit expresses the result of the functioning of credit relations and is determined by the essence of the latter, i.e. has an objective nature:
- The regulatory role of credit, which manifests itself in maintaining optimization of proportions of public reproduction.
- Credit has an important role to play in ensuring NTP (improving the technical and technological level of the reproduction process).
- One aspect of the impact of credit on economic processes is its role in saving the costs of circulation, in its exercise of the function of replacing cash with credit transactions.
- The role of credit in the social sphere is significant, increasing the efficiency of public production loans more fully satisfy the needs of society (growing Credit contributes to the improvement of the state of the consumer market in accordance with the priorities of social policy (production of consumer goods).
The principle of urgency, payment, and return means that the loans granted to the borrower must be paid and returned within the time specified by the loan agreement.
1. The targeted nature of loans means that its purpose is determined, first of all, by the borrower himself, but the bank when allocating the loan is based on its purpose, from a specific object of lending, because without compliance with this principle it is difficult to ensure the return of the loan within the time limits established by the contract.
2. The principle of material security means that the borrower is obliged to carry out those activities that provide a direct link between the granting of the loan and its security.