Noncash Payments

payments made without the use of cash by transferring certain sums from the accounts of the payer to the account of the creditor (in a bank or savings office) or by offsetting mutual claims. Noncash payments are characteristic of an economy with developed commodity and monetary relations and are a component of unified monetary turnover, which also includes the circulation of cash.

Under capitalism the development of credit and of banking serves as the economic basis of noncash payments. Because production and goods turnover grow more rapidly than the mining of precious metals, a gap arises between the needs of the growing goods turnover for full-value money and its availability in circulation; credit means of circulation and payment appear (bill of exchange, banknote, and check), which aid in overcoming the narrowness of the metal base of monetary circulation and in creating the economic prerequisites for the development of a system of noncash payments. These means are realized with the aid of (1) bills of exchange and checks, which replace full-value money in circulation; (2) noncash transfers to the current accounts of clients in banks and savings offices; (3) a system of correspondence accounts between various banks; and (4) accounting of mutual claims through clearinghouses. Noncash payments speed up the turnover of capital, reduce the costs of circulation, and ultimately promote the expansion of the scale of capitalist production and increase profits. In the epoch of imperialism noncash payments are monopolized by the largest banks and serve as one of the means of bank capital merging with industrial capital. In some capitalist countries certain peculiarities and distinctive features, which arise from historical and economic causes, exist in the organization of noncash payments. It was in London, in 1773, that the first clearinghouse was organized; noncash payments came into wide use with the aid of drafts and checks, as well as by means of clearing. In the USA, where banks were forbidden for a long time to have branches inside the country, correspondence accounts and clearing have been developed, but the overwhelming proportion of all payments are made by check. In France, the Federal Republic of Germany, and a number of other countries where there are many deposits from medium-and small-scale owners, noncash payments are made chiefly through a system of endorsement payments.

Noncash payments in prerevolutionary Russia began to be developed intensively at the end of the 19th century and especially at the beginning of the 20th century. By 1917 noncash payments, including clearing and intrabank payments, had developed considerably.

Under socialism noncash payments perform important functions in mobilizing temporarily free money and in concentrating it in credit institutions as a resource for providing credit to the national economy. The state also utilizes noncash payments as one of the tools of control over the economic activity of enterprises and organizations. In the USSR, depending on the volume and period of money coming into the account of an enterprise, the most important indexes of its activity can be determined—sales and profits. These indexes play an important role in the system of economic incentives under the economic reform that has been carried out since 1965. The basis of the system of noncash payments that now exists in the Soviet Union was established in 1930–32, when, during the credit reform, commercial credit was abolished and direct bank credit was introduced. Short-term credit and payment turnover were concentrated in the Gosbank (State Bank) of the USSR, which has made it the unified payment center of the country. The Gosbank carries out all noncash payments, establishes the forms of payments, determines the procedure and deadlines of payment for documents, and so forth. The state regulates (by legislation of the USSR) the rules for monetary turnover and for providing credit in the economy. All enterprises, organizations, and institutions are required to keep their money in a bank and to carry out mutual payments on a noncash basis (except payments of small sums, which are made in cash). A document made out by one enterprise and addressed to another enterprise cannot be used to settle accounts with a third; there is no nonbank circulation of payment documents. Commercial credit is prohibited; the issue of goods or the rendering of services by one enterprise to another on a credit basis, if the system of advancing credit does not provide for it, is not permitted. Each payment document is paid for in accordance with the groups of payment priorities established by legislation. Under the first group are wage payments and payments equivalent to wages (pensions and stipends) and then payments for documents on settling accounts with the budget. Under the second group are payments for goods, materials, and services and the completion of accounting of mutual claims; under the third group, payments of depreciation deductions and profits for the financing of capital investments and capital repairs; under the fourth, payments to clear bank loans and guarantees; and under the fifth, all other payments.

Noncash payments subdivide into intercity and intracity (local) noncash payments. In intercity payments the acceptance form of payments is dominant, while in intracity payments the widest use is made of payment commissions, checks, and plan payments. Noncash payments are also made through the system of savings offices. Trade-union and public organizations, rural budget institutions, kolkhozes, schools, and polyclinics can keep their money in savings banks and make noncash payments through them. On a noncash basis, on commission from their depositors, savings banks also make payments for an apartment, gas, telephone, and electricity, as well as payments on taxes, insurance, and so forth.

In the other socialist countries the overwhelming majority of payments by enterprises are made through banks by means of noncash payments. The basic forms of noncash payments are the acceptance form with the collection on payment documents, the letter of credit, payments by means of commissions and checks, and plan payments.