Crediting of Notes

The following article is from The Great Soviet Encyclopedia (1979). It might be outdated or ideologically biased.

Crediting of Notes

 

credit granted by banks to holders of notes (bills of exchange and promissory notes) and by sup-pliers to their customers.

This form of crediting arises with the development of commercial credit, when notes are used instead of cash to pay for the purchase of goods and the holder sells the notes to a bank or deposits them in the bank. The crediting of notes operates through the discounting of notes, the opening of special current accounts against the notes, and the issuing of loans with the notes as security. The most common form of the credit is discounting notes, that is, the purchase by the bank of the notes before they become due. The bank charges a discounting rate for the credit given in this way. When special current accounts (call loans) are opened, the bank issues loans against the security of the notes that are turned over to it. An enterprise that has received this kind of bank credit has the right to issue checks within the limits of the loans obtained. The bank may reduce the size of the credit and also demand that certain notes be replaced by others. The loan with notes as security is a one-time credit transaction. Loans granted by the bank must be repaid when the notes given as security become due.

In the USSR, the crediting of notes was used from 1922 to 1930 by state, cooperative, and private enterprises in buying and selling goods and offering services. In 1930, with the abolition of commercial credit, the crediting of notes and promissory note circulation within the country were eliminated.

V. G. GERASHCHENKO

The Great Soviet Encyclopedia, 3rd Edition (1970-1979). © 2010 The Gale Group, Inc. All rights reserved.