Meaning and significance of credit
Credit is trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a debt), but promises either to repay or return those resources (or other materials of equal value) at a later date. In other words, credit is a method of making reciprocity formal, legally enforceable and extensible to a large group of unrelated people.
The resources provided may be financial (e.g. granting a loan), or they may consist of goods or services (e.g. consumer credit), Credit encompasses any form of deferred payment. Credit is extended by a creditor, also known as a lender, to a debtor, also known as a borrower.
Importance of Credit for Country Below are the few points, which tells the importance of credit for country and how credit the make the economy strong.
1. Credit enables the individual or business to “purchase ahead of ability” or “desire to pay”.
2. The Economic needs of agricultural, commercial and industrial sector of the economy are adequately met by the bank credit.
3. Bank credit accelerates the process of economic development in the country by providing loan to the industries in time.
4. Goods are purchased, processed, store and then sold at the appropriate time to consumers.
5. The farm credit needed by farmers helps in increasing agricultural production in the country and helps the farmers in the development of agricultural.
6. Bank credit facilitates the large scale production of good and other necessities of life, which result in technological research and lowering the cost.
7. From the bank credit, the transportation of commodities from one place to another place is also made easier and economical.
8. The consumption needs of the consumers such as automobile, house and other necessaries are also met by the commercial credit.
9. Supply of credit by bank to consumers and business, increases the rate of economic growth, which would have been limited with the savings of the people..
10. The rate of interest is also influenced by the bank credit. The flexibility of bank credit regulates the rate of interest which has healthy effects on the production in the economy.
11. Credit instruments, like bill of exchange, greatly facilitate international trade. Payments thus made without the actual movement of treasure to any large extent.
12. With the help of credit, people with brilliant brain can utilize their abilities and qualities in running business enterprises. In the absence of credit, their talents would have gone waste.
