The full functioning of the average company is possible if it has additional and permanent sources of financing. An enterprise can use both its own resources and raise financial resources from credit organizations. For example, the head of a company or entrepreneur may apply to the bank for the purpose of obtaining a consumer loan or commercial loan.
The interest rate is determined by each client individually. At the same time, the choice of the best option may be difficult due to differences in indicators in different banks. For this reason, the weighted average interest rate on loans is used. The method of definition of the term and the formulas for its calculation are standardized and applied in all banks.
Definition of the term
Weighted average interest rates on loans granted are formed depending on the level of their use. The indicator of a financial enterprise is defined as the total value of previously issued and received loans. Simply put, this term means the average price of a loan portfolio. The indicator is considered within the company in order to analyze the effectiveness of its activities.
In the framework of the general banking system, the term refers to the total value of all loans in all banks of the country. The success and effectiveness of the banking system is determined on the basis of an indicator of this level. The weighted average interest rate can also be used as a criterion for assessing the dynamics of credit policy promotion.
Types of loans to determine the indicator
The weighted average interest rate of the Central Bank of the Russian Federation on loans is calculated without fail, due to the need to analyze the activities of the company. The required calculations cannot be performed using simple indicators that characterize the lending process. For this reason, specialists take into account the various categories of loans issued by banks when making settlements.
In particular, the following loan options are applied:
- With a long installment period.
- Investment.
- Provided for a short time period.
- Funds issued by the bank in the form of current assets.
It is worth noting that the weighted average interest rate of the Central Bank of the Russian Federation is calculated for individuals and companies. Both indicators are in the public domain: for example, last year the indicator was 15% per annum.
What is included in the assets of banks?
To assess the liquidity of a credit institution, you need to know what is included in their assets. Bank assets mean resources owned by the organization. The company may dispose of them at its sole discretion.
Bank assets include:
- Own resources.
- Cash balances on current accounts owned by legal entities and individuals.
- Deposit accounts owned by organizations.
- Private contributions.
- Interbank and similar loan products.
An excessively liquid bank that is out of balance begins to lose its profit, since free funds can be put into circulation and you can start to receive a percentage of profit from them, but for the time period that the money was in the account, they were a useless load, and not worked.
Why calculate the average cost of loans
Commercial financial organizations in Russia regulate their own liquidity by attracting third-party resources or allocating the surplus of their available funds outside the bank. The resources of commercial banks are:
- Start-up capital.
- Deposit agreements of enterprises.
- Cash balances on settlement or current bank accounts owned by legal entities and / or individuals.
- Bank deposits of the population.
- Other loans, including interbank.
An excessively liquid commercial financial institution may issue interbank loans to other structures with lower liquidity. With a lack of liquidity, on the contrary, commercial banks resort to interbank lending in order to attract resources.
The weighted average interest rates of interbank loans directly depend on the balance of the demand and supply of finance in the market. At the same time, interbank lending operations affect the cost of loans for individuals and the efficiency of financial institutions.
For this reason, the volume of credit operations in the credit market is regularly monitored and regulated by the Central Bank of the Russian Federation. He carefully adjusts interest rates on loans.
A timely and adequate response of the Central Bank of Russia to changes in liquidity in the state banking system and the cost of national resources is possible only with regular and correct calculation of the average interest rate indicators affecting interbank credit organizations.
Formulas for calculations
The weighted average interest rate for loans to individuals and companies is calculated using a special formula. The definition of the standard average value differs from the scheme for calculating the interest rate: the loan amount plays a significant role in it. The formula for the calculation is as follows:
ATP = ∑ (K * P) / ∑K, where:
- ATP is the weighted average interest rate.
- K - balance of the credit account.
- P - credit rate.
Calculation example
A practical example allows you to understand the correct order of calculations. You can take three loans with different parameters:
- The first loan in the amount of 15 million rubles at 10%.
- The second - in the amount of 10 million rubles at 8% with the condition that 8 million have already been returned.
- The third - in the amount of 2 million rubles at 15% with a loan balance of 1.5 million.
The calculations performed using the above formula allow us to say that the weighted average interest rate is about 10%. Interest rates for foreign currency loans are determined in a similar way, however, when calculating them, the main rate of the Central Bank of the Russian Federation is taken into account.
Lower average interest on loans
The most efficient use of borrowed funds is possible with a minimum weighted average interest rate. To keep it low, you must adhere to several rules:
- Making loans at the minimum interest rate.
- Prioritize high interest rate loans.
- Refinancing or restructuring the loan subject to an increase in interest rates during the loan term.
- The debt repayment schedule is designed in such a way that only loans with low interest rates remain open by the end of the term.
Within the framework of one enterprise, the average weighted interest rates on loans should be under strict control. Such a strategy makes it possible to appropriately allocate company resources and maintain the effectiveness of its activities.
A similar rule applies to the amount of credit resources in the country, since the effectiveness of the financial system of the state directly depends on the average rate. The Central Bank is responsible for tracking and adjusting rates.
Summary
The procedure for calculating the weighted average is quite simple.To do this, it is advisable to know the basic criteria for loan products and be able to use a special formula.
