Today we will try to figure out what exactly affects fluctuations in bank lending rates, why we pay additional commissions when repaying interest on loans, what additional deductions you should think about when insuring your own life.
The central bank as a key element of refinancing
The refinancing rate is primarily a tool through which commercial financial institutions are supplied with funds from the Central Bank. What is the role of this state body?
Everyone knows that the Central Bank is responsible for all monetary policy, and the purpose of this activity is to ensure the well-being of the country's population (at the proper level). This is part of a long-term strategic government policy towards maintaining a decent level of GDP.
The Central Bank has its own levers of influence, which are called mechanisms of influence. They are approved by law and are as follows:
- limiting operatingcommercial bank rates;
- backup rationing;
- swift intervention in the open market;
- issuing activity;
- currency regulation;
- refinancing the rates of commercial organizations engaged in lending activities.
The concept and calculation of the refinancing rate
Since we are talking about the instruments of influence of the Central Bank, we will focus on the last and, in its way, the most important of them. The refinancing rate is an indicator that is formed in relation to economic and inflationary processes in the state. As a rule, it does not require additional calculations, since it has a clearly established coefficient in a certain period, but more on that later.
Now it should be understood that it directly affects the level of access to loans for the general population. The refinancing rate is the value that regulates the number of loans in the country. In other words, the lower it is, the more likely it is that households can afford to pay interest and charges on the funds they borrow.
The level of the rate affects entrepreneurial activity in much the same way. The lower it is, the more current borrowed funds you can attract to your own business. Because the percentage is quite low.
Refinancing and government
So, we realized that the level of this coefficient directly affects the welfare of both households and business entities. What is hisrole for the state? The government, in turn, determines the level of taxes, fines and pen alties at the refinancing rate. In other words, the entire fiscal policy of the state depends on it.
Well, since this coefficient is a general regulator of cash flows, there is a certain relationship: as soon as the inflation rate in the country begins to approach the maximum level, the rate, accordingly, rises, thereby reducing the amount of borrowed funds at the disposal of the population.
As far as fiscal policy is concerned, the regulatory process is much more complicated here.
Refinance and your loan
Let's first consider the most important tax for all households - personal income tax. When an ordinary person takes out a loan from a commercial bank and it's time to pay the interest, he doesn't think much about what hidden commissions are reimbursed additionally. Let's look at an example. Suppose the refinancing interest rate at the time of issuing loans is set by the state at 15%, while the bank lends funds at 11%. The optimal creditor coefficient, in accordance with the current legislation (Article 212 of the Tax Code of the Russian Federation), will be 75% of the state established one, that is, 11.25%.
It turns out that the borrower saves 0.25% of the loan by taking a loan from this bank. From this amount, personal income tax will be deducted from him as an additional benefit. It is usually included in the cost of servicing the loan, andoften no one pays much attention to them, because they accumulate a little.
Refinancing and business
Entrepreneurs in the course of normal operating activities can be affected by the Central Bank rate (refinancing) only if they pay for purchased goods or services with securities (for example, bills or bonds) that were previously purchased from a third party. This condition applies only to cases where the goods are subject to VAT, and the transaction is carried out on the territory of the Russian Federation.
Then the nominal value of taxation will increase by the amount of income on securities. In this case, only that profitable part is taken into account, which exceeds the allowable in the initial calculation, in accordance with the current refinancing ratio.
In this case, the refinancing rate is the amount that your business can suffer. Therefore, if this indicator was higher when purchasing a bill than at the time of the transaction, the entrepreneur will lose. If, on the contrary, the rate has increased, he will remain in the profit from the operation.
Refinancing and insurance
Among other things, the Central Bank's refinancing rate has a certain degree of influence on the income of citizens in the event that they insure their lives. How does it work?
As an example, let's take a type of insurance that was popular at one time - the reimbursement of a certain amount of funds upon reaching a certain age. Let us assume that the insured regularly paid contributions fromown pocket for several years, and now the coveted year of payment has come.
Here it is important to understand in what amount the refinancing rate was presented by the state at the time of conclusion of the insurance contract. If on the day of payment the amount of compensation does not exceed the total premium increased by the coveted coefficient, then there is no reason to fear anything. If the opposite is true, then you will need to pay personal income tax for the additional benefit received from the difference.
How refinancing rates change by year
Over the past decade, this ratio fluctuates between 7-9%, which indicates some stability in the country's monetary market. Nevertheless, I would like to consider situations where the rate directly affects the behavior of commercial banks.
For example, the refinancing ratio has increased. In such a case, credit unions and other institutions engaged in lending activities must somehow compensate for the expected decline in demand for their services. It's simple - the interest on the provision of funds will increase.
But that's not all. Such coefficients change for a reason. Most likely, if this happened, then the state is introducing a new fiscal policy to regulate inflationary processes. And this means that new reforms in the form of legislative and regulatory acts will follow, so banks will have to adjust their business to the next trends.
Refinancing andcapitalism
Let's consider the situation on the example of a country with a developed market economy - the USA. The refinancing rate today plays a crucial role in the fiscal regulation of cash flows and the formation of the federal reserve. In America, this indicator determines the percentage that a commercial bank must pay in the case of temporary use of public funds. Therefore, if this coefficient is low enough, then nothing threatens the commercial system, and it can easily carry out operational activities. However, as soon as the rate starts to rise, then the activity of credit institutions is at risk, as the likelihood that they will be able to pay their own obligations drops sharply, which subsequently threatens with a default.
Refinancing rate in Russia
At one time, this indicator played a significant role in regulating cash flows in the vastness of the country. Thus, in the fight against inflationary tendencies in 1992-1996, this coefficient reached 99%.
When such flows, inherent in an unhe althy economy, were relatively successfully regulated, then the indicator began to steadily fall. Now commercial financial institutions can easily and at a very adequate rate provide both long-term and fairly short-term loans (and sometimes even issue loans for one night or a weekend), without sacrificing either their reputation or the interests of customers.
Moreover, it should be noted that the refinancing rate ontoday in the Russian Federation it is only informational in nature, which is enshrined in law and has guarantees until January 2016.
