The number of Russians who want to be comprehensively developed and economically literate is increasing every day. This applies not only to people whose activities are somehow related to financial institutions, or students in this field. Being educated and well-versed in financial matters is not only prestigious, but also necessary for those who want to keep up with the times, and given the current unstable times, it is also vital. In this article you can get answers to questions that interest you on the topic "Refinancing is ..."; find out how such a tool can affect the life of a citizen of the Russian Federation.
What is refinancing?
Define what it is. Refinancing is a process during which a borrower is obliged to repay an existing loan to the lender by issuing a new loan. It is planned that this loan will help cover existing costs.
At the same time, Federal Law No. 86-FZ "On the Central Bank of the Russian Federation" dated July 10, 2002, in Article 40 determines that refinancing is the implementation by the Central Bank of the Russian Federation of lending to financial institutions (commercial banks).
The main objectives of refinancing
Why does the borrower resort to refinancing? There are several goals that he pursues at this time:
- Making a loan on new and profitable or loyal terms, for example, at a rate lower than the previous one, which will help reduce borrower costs.
- Getting a new loan to increase the loan term.
Note that CB loans for commercial banks are additional resources for providing loans to customers.
Fundamental concepts
Since we already know what refinancing is, we now consider the term “refinancing rate,” which is also fundamental. Understanding it is not difficult at all. The Central Bank of the Russian Federation refinancing rate is the interest rate that the Central Bank of the Russian Federation uses when providing various loans to commercial entities through the refinancing process. This process is beneficial not only for the borrower.
It has been established that the Central Bank refinancing rate is necessary to accurately determine the true value of the ruble, which is mandatory in a market economy. The rate level is set as a result of competitive selection or it can be assigned, and it is used primarily for more effective cooperation with commercial banks.
Credit institutions (banks) have the right to receive loans from the main state bank Russia on the security of its own securities or through the re-registration of securities.
A fairly effective tool of the state economy
Consequently, the refinancing rate of the Russian Federation is a highly effective instrument by which the Central Bank of Russia influences the established interest rates both on investments (deposits) and on loans, which, in turn, are provided by financial organizations (commercial banks) to legal entities as well and physical. It is due to this process that financial institutions (banks) are more dependent on the approved rate of the Central Bank of Russia in their interest rate policy, and it, in turn, acts as a guarantor of the entire financial system of the state.
The Central Bank of Russia has every right to adjust the refinancing rate.It can also be reduced during the use of a loan by a commercial bank to service the most significant areas of economic development, implement government programs, as well as to compensate for the reduction in the volume of deposits received, etc. This loan assistance to banks is provided to support their liquidity. Moreover, in order to receive such a loan, a commercial bank must necessarily show a high level of its financial stability.
What are the effects of refinancing rates?
By changing refinancing rates, the Central Bank of the Russian Federation affects both demand and the proposals existing in the credit market by changing the cost of existing loans. From the Central Bank depends on the liquidity of banks, their lending activity, as well as the volume of the mass of money existing in the state.
Adjustment of the refinancing rate has a direct impact on the financial situation of citizens of the Russian Federation. Let's look at some of the main trends that apply when lowering or increasing this type of bet. If the Central Bank refinancing rate is reduced, then expect a decrease in the cost of bank loans, which is very beneficial for borrowers. The situation with investors manifests exactly the opposite. And an increase in the established rate, in turn, causes an increase in interest on deposits and more expensive loans.
Where is the refinancing rate applied?
Consider where the Central Bank of the Russian Federation refinancing rate is now applied when taxing income on deposits.
Some deposits from individuals suggest that interest income will be taxed. This corresponds to the Tax Code of the Russian Federation, which determines that the tax rate is set taking into account the current refinancing rate of the Central Bank of the Russian Federation. It should be borne in mind that tax is accrued exclusively for the period for which interest on deposits in national currency is accrued (the exception is fixed-term pension deposits that are concluded for a period of more than six months). And also in the case of calculations regarding the manifested material liability of the employer for the remuneration of employees, which was made inopportune.
The Labor Code of the Russian Federation in article 236 provides for an violation by the employer of fixed deadlines for payment of wage arrears, vacation pay, settlement payments upon dismissal, and other payments to the employee determined by applicable law, monetary compensation from the employer in accordance with the indicated percentage of the Central Bank of Russia refinancing rate that is currently in effect , of the amount of funds not paid by the due date. Such compensation is paid for every next day after a fixed payment deadline, including the day of actual repayment. The amount of monetary compensation of this kind for each company is individual and must be reflected in the employment contract.
When calculating the size of the penalty for delay in fulfilling the obligation to pay a fee or tax, a penalty is charged, according to paragraph 4 of Article 75 of the Tax Code of the Russian Federation, for an overdue payment day and is calculated as a percentage of the amount of the fee or tax that was not paid on time. The interest rate of the debt is equal to 0.033 of the current CBR refinancing rate.
One of the most important economic processes.
Summing up everything that was stated above, we can conclude that adjusting the refinancing rate has a direct effect on inflation in the state, a decrease (increase) in interest rates on loans and deposits, state fees, an increase in the value of the ruble, and macroeconomic and microeconomic indicators of the Russian economy in whole. So, refinancing is a very important process, which is of key importance for the state economy. Understanding its meaning, you can not only understand what is happening in the state.Now, if you find out that the refinancing rate has been changed, then you will be able to draw conclusions and take measures to improve the financial condition of your family as soon as possible.
