home Loans The upper limit of interest for a loan is determined by market conditions. The lower limit is formed taking into account the costs of the bank to raise funds and ensure the functioning of the credit institution. The upper limit of interest for a loan is determined by market conditions.

The upper limit of interest for a loan is determined by market conditions. The lower limit is formed taking into account the costs of the bank to raise funds and ensure the functioning of the credit institution. The upper limit of interest for a loan is determined by market conditions.

Interest on bank loans - payment received by the creditor (bank) from the borrower for the use of borrowed funds (credit). The issuance of loans is a financial transaction that provides for the provision of a certain amount of money (Ao) on credit with the condition that after a set time the borrower will return a large amount (A1) with an increment in the form of interest. The creditor's income is called interest income.
The accrual period, amount, term and procedure for paying interest on various types of credit operations is established under a loan agreement between the bank and the borrower.
At the level of interest rates commercial bank affect: the average level of payment for attracted resources, i.e. deposit interest; bank expenses; purpose (object) of lending; client's creditworthiness; the nature of the client; degree of riskiness of the project; the level of the tax rate on the bank's income; the state of demand for credit; credit term; the possibility of additional attraction of credit resources (availability, offers, fees); inflation rate and other factors arising from monetary policy the central bank, the government, the image of the lender and the borrower.
The interest rate also depends on the risk of insolvency of the borrower, the nature of the security provided; return guarantees; the content of the credited event; rates of competing banks and other factors. The interest rate on the loan may also include a fee for the services rendered to the borrower when issuing the loan.
The upper limit of interest for a loan is determined by market conditions. The lower limit is formed taking into account the costs of the bank to raise funds with the addition of a margin that ensures the functioning credit institution. When calculating the rate of interest in each specific transaction commercial Bank takes into account the level of the base interest rate and the risk premium, taking into account the loan agreement. The base interest rate is determined on the basis of the estimated cost of credit investments and the pledged level of profitability of the bank's credit operations with minimal risk. The estimated cost of credit investments includes the average real price of all credit resources for the planned period plus the bank's planned expenses to ensure its functioning (the ratio of expenses to the expected volume of credit investments). The average real price of credit resources is determined on the basis of their market nominal price and adjustment for the required reserve ratio deposited with the central bank.
The base (basic) rate for a loan is the result of the average impact of factors on the level of rates. This is not the minimum rate, as banks can provide loans at a lower interest rate. The base rate may vary from bank to bank. When setting interest, banks usually take into account the size of the base interest rate of other banks. Many small banks can change the percentage for a loan depending on the base rate of large banks. The base rate is a kind of initial, or starting value.
The interest on active operations of the bank plays an important role in generating income, and the fee for resources occupies a significant place in the composition of its expenses, so the correct determination of the margin is of particular importance. Margin - the difference between the average rates for active and passive operations of the bank. The size of the actual interest margin is determined as the ratio of net interest income (interest accrued minus interest paid) to the average volume of credit investments. Comparison of the actual interest margin with the base allows you to determine the trend of decreasing or increasing interest income. The main factors influencing the size of the interest margin are the volume, composition and structure of credit investments and their sources (credit resources). Distribution of loans by terms (long-term and short-term), having different ways of providing risk; by borrowers (state, commercial enterprises, population); for the purpose of the loan determine the different profitability of credit investments. In this case, the volume of deposits, their types, terms, etc. are important. In general, a change in the interest margin may be caused by an increase or decrease in rates on the bank's active operations, interest on attracted paid resources (passive operations) and the share of paid resources in the total volume of credit investments. The size of the interest margin is directly affected by the ratio of credit investments and their sources at the time of payment and the urgency of revising interest rates. Interest rates should be reviewed depending on market conditions and adjusted to it.
Interest rates for a loan can be fixed (fixed), floating, discount. Loans can be issued at a fixed rate. Repayment of loans is accompanied by predetermined interest payments, unchanged throughout the entire period. Fixed interest rates are set on loans, usually with a short term.
“Floating” interest rates fluctuate depending on the development of market relations, changes in the amount of interest on deposits (deposits), the emerging demand and supply for credit resources, as well as the state of the economy, financial condition the borrower and may be reviewed by the bank during the loan period with the obligatory notification of the borrower. In addition, the bank may change the interest rate on the loan, including the fixed one, in accordance with the interest rate policy of the central bank and other competent authorities aimed at stabilizing and regulating monetary circulation.
Interest rates on loans with floating interest may be lower than rates on loans with a fixed interest, since the risk of the borrower is higher here, the interest rate may rise and his monthly payments to the bank will increase. Loans with floating rates are more beneficial for commercial banks, as they allow them to protect themselves from possible rate increases on deposit operations and refinancing rates.
A discounted loan is a loan, the nominal amount of which is less than the amount that is actually transferred to the borrower by the bank at the time of issuing the loan.
The difference between the nominal value of the loan and the amount transferred to the borrower is withheld from the borrower also at the time of issuing the loan and is a form of special interest (discount). Discount loans have a different mechanism for charging interest, like fees. Example, in the case of a conventional loan of 100 million rubles at 20%, the borrower receives 100 million rubles, and returns 120 million rubles. At a discount rate (20%), the borrower will receive 80 million rubles (100-20) and repay 100 million rubles. In this case, the borrower actually pays a slightly higher interest on the loan than in the case of a conventional loan. Discount interest takes into account the risk of the lender, which was associated with the issuance of this loan.
When constructing the interest rate policy of banks on loans, all elements and factors of the functioning of this percentage are taken into account. At the same time, the practice of setting interest has developed certain trends. In particular, interest rates on loans are generally higher than interest rates on deposits; rates for first-class borrowers are more stable (and lower) than for less reliable loans, with a higher degree of risk when issuing; rates for long-term loans fluctuate greatly depending on the composition of borrowers (population, state structures, commercial organizations) and terms of issue; rates on interbank loans are based mainly on market conditions; strong dependence on the monetary policy of the state, the central bank.

Credit limits Credit limits are determined by such a level of development of credit relations in which the process of credit implementation balances the demand and supply for credit resources under conditions of a stable, moderate and affordable for the vast majority of normally functioning borrowers, the interest rate. At the microeconomic level, the limits of the loan are determined by: and the volume of demand for a loan from borrowers at the nominal rate of a bank loan and the available ...

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Topic 11. Objective limits of credit and loan interest

11.1. Credit limits

The boundaries of the loan are determined by such a level of development of credit relations, in which the process of implementing the loan balances the supply and demand for credit resources in conditions of a stable, moderate and affordable interest rate for the vast majority of normally functioning borrowers.

At the microeconomic level, credit limits are determined by:

a) the volume of demand for a loan from borrowers at the nominal rate of a bank loan and the available market rate of loan interest;

b) the nature of fluctuations in the needs of the borrower in fixed and working capital;

c) according to the state of provision of the borrower with own capital and the efficiency of its use;

d) the effectiveness and payback of projects for which funds are borrowed.

Under such conditions, the dynamics of bank interest becomes the main indicator of compliance and violation of the boundaries of the loan. Subjective attempts to increase the level of lending inevitably lead to the appearance of excess means of payment in circulation and negative consequences for individual enterprises and the economy as a whole. And vice versa, the rapid growth of bank interest indicates an insufficient supply of credit, that is, a violation of the boundaries of credit and “under-crediting” of the economy.

The macroeconomic level of credit boundaries is formed under the influence of the volume and rate of GDP growth, the structure and level of development financial system and states public finance, goals and methods of implementing the state monetary policy, development of market relations.

11.2. Interest limits

Loan interest has certain limits, because. rate increases cannot be unlimited.

There are objective upper and lower limit of their rates.

upper border loan interest determines the average profitability of enterprises and the level of income (savings) of individual customers.

The borrower who received the loan must repay the loan, pay interest, receive income. At the same time, the borrower's income rate should not be below the socially average level. Therefore, the interest rate must be calculated with the possibility of obtaining this necessary profit. If the interest rate is initially high so much that it absorbs all profits, then the use of a loan is inappropriate.

Objective criterion lower bound interest on the loan are the costs of the bank. The main thing in the banking pricing system is the establishment of a "dead point" of profitability. Its indicator is the minimum difference of 5 rates on active and passive operations - min % margin.

Bank costs:

Accumulation and placement of resources;

Expenses for the creation of required reserves of the bank;

To create various development funds of the bank;

Losses on depreciation of bank capital.

Therefore, when choosing a pricing strategy, the bank must take care of compensating all costs.

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In a market economy, where the presence of inflation is mandatory, there are nominal and real interest rates for loans.

The real rate is adjusted taking into account inflation growth rates.

It is the real interest rate that is important when deciding whether to use a loan.

The upper limit of interest for a loan is determined by market conditions. The lower limit is formed taking into account the costs of the bank to raise funds and ensure its own functioning.

When calculating the rate of interest in each specific transaction, a commercial bank takes into account:

a) the level of the base interest rate, which is calculated on the basis of the real price of raising funds;
b) the level of the bank's own expenses;
c) the planned rate of profitability of lending operations;
d) risk premium subject to the terms of the loan agreement.

Base interest rates are the average interest rates at which loans are made to prime borrowers.

The risk premium is set depending on the following criteria:

a) the creditworthiness of the borrower;
b) availability of collateral for the loan;
c) the term of the loan;
d) relationship between the client and the bank;

Considering that the payment for borrowed resources occupies a significant place in the composition of the bank's expenses, the issue of the difference between the average rates on loans issued and attraction of deposits (interest margin) is of great importance.

Fixed and floating rate.

Interest rates can be fixed or floating.

The fixed interest rate is set for the entire loan period and is not subject to revision. This is beneficial for both the lender and the borrower, since both parties are able to accurately calculate their income and expenses associated with the use of the loan. Fixed interest rates are usually used for short-term loans.

A floating interest rate is a rate that constantly changes depending on the situation developing on credit markets and in the financial market of the country.

In world practice, the following groups of floating interest rates are used:

1) Official interest rates (discount rate and refinancing rate) are set by the Central Bank of the country. At these rates, the Central Bank provides loans to commercial banks.
2) Interbank rates of supply of credit resources. Interest rates at which banks lend to each other. The most widely used base rate is LIBOR, the London Interbank Offered Rate. These are the rates for deposits in pounds sterling and US dollars. Calculated as the arithmetic average of fixed rates at 11 am each business day, respectively, 7 banks in England or 5 banks in the US. The LIBOR rate for Eurocredits is calculated, as a rule, for 12 currencies and for several periods (1 week, 1, 2, 3, 6, 9, 12 months). At the rate of LIBOR, lending is carried out between first-class banks in the Eurocurrency market.
3) The prime rate ("prime rate") is the published rate for loans to prime borrowers. It serves as a benchmark for the cost of a loan and is usually 1-2% higher than the first two rates.
4) The rate of loans to small firms and individuals.

Depending on the initial base, the amounts for interest calculation distinguish between simple and compound interest.

Simple interest involve applying the rate to the same initial amount throughout the life of the loan.

Compound interest is calculated on the amount of interest accrued in the previous period.

Interest is accrued in the amounts and terms stipulated by the agreement, but at least once a quarter and is paid in installments according to the schedule of repayment of interest amounts due by the bank. A one-time payment of interest upon repayment of the principal amount of the debt is allowed only when issuing a loan for a period not exceeding 3 months. If the amount contributed by the borrower is insufficient to repay the urgent payment, overdue debt and accrued interest, then the interest is repaid first, then the overdue debt, and the remaining amount is used to repay the principal amount of the debt. This order is stipulated at the conclusion of the contract.

What does the interest rate depend on?

The main factors that a commercial bank takes into account when setting a fee for a loan:

- average interest rate on interbank loans;
- the average interest rate. paid by the bank to its customers on deposits of various types;
- the structure of the bank's credit resources (the higher the share of borrowed funds, the more expensive the loan);
- supply and demand for loans from customers. An increase in demand leads to an increase in interest rates;
- the term and types of the loan, or rather the degree of risk for the bank of non-repayment of the loan, depending on the security;
- stability of monetary circulation in the country (the higher the inflation rate, the more expensive the date for the loan);
- the nature of the relationship between the lender and the borrower;
- expenses for registration and control over the use and repayment of the loan.

The refinancing rate of the Central Bank serves as the main benchmark for the level of loan interest.

A change in the refinancing rate affects the level of loan interest, since interest for the loan is included in the cost of production within the refinancing rate, and in excess of this amount is paid out of profit. Interest on interbank loans is also included in the bank's expenses only within the refinancing rate, in excess of this rate they are charged from profit.

The loan interest rate is influenced by the degree of risk of credit investments: the greater the risk, the higher the interest rate. On the other hand, the borrower has to take risks. If a loan is issued at high rates, the risk of ongoing operations increases significantly, because. the borrower needs to invest money in such a way as to repay not only the principal amount of the debt, but also the interest.

Loan interest arises in the conditions of commodity production on the basis of credit relations. It is used for all forms and types of credit.

If a loan is a movement of value on the basis of repayment, then the payment of interest characterizes the transfer of a certain part of the value without obtaining an equivalent.

The movement of the loan begins from the lender to the borrower, the payment of interest goes in the opposite direction. It is typical for the creditor to advance funds, while the payment of interest means the completion of the circuit of value. Moreover, they occur in different stages reproduction process: credit - in the sphere of exchange, interest - in the distribution phase.

In order to induce the owner of loan capital to refuse the immediate disposal of resources, it is necessary to reward him for such a refusal. Interest on a loan thus makes a loan possible and cannot exist outside of a credit relationship. This conclusion is confirmed by the formula for the movement of funds in lending.

For a bank, the movement of loan capital can be represented by the following formula:

D-D",

where D"=D+%.

It can be seen from the scheme of movement of the loan fund that the final D "is greater than the initial (advanced) by the amount of interest. Therefore, interest must be considered as an element of credit relations, that is, as a form of payment for loaned funds.

Loan interest in all its forms is characterized by the following mechanism of use:

The level of loan interest is determined by macroeconomic factors: the ratio of demand and supply of funds, the degree of profitability in other segments of the financial market, the regulatory direction of the interest rate policy of the Central Bank of the Russian Federation, and also depends on the specific conditions of transactions to attract and place funds;

The procedure for accrual and collection of interest is determined by the agreement of the parties. As a rule, monthly or quarterly interest accrual is applied.

The form of loan interest depends on a number of features:

Form of loan (commercial%, bank%, consumer%);

Type of credit institution (% rate of the Bank of Russia, bank rate);

Type of investment involving a loan (investment in working capital, investment in securities etc.);

Loan term (% rate depends on the loan term);

Types of operations of a credit institution (% on deposits, % on loans, accounting %, etc.).

In conditions of inflation, there is a nominal and real interest rate for a loan. The real rate is adjusted taking into account inflation growth rates. It is the real interest rate that is important when deciding whether to use a loan.

Calculation of the real interest rate for a loan is carried out according to the formula:

Where: I r - real annual interest rate for a loan;

I - annual interest rate for the loan (nominal interest rate);

R is the expected rate of inflation for the year;

The upper limit of interest for a loan is determined by market conditions. The lower limit is formed taking into account the costs of the bank to raise funds and ensure the functioning of the credit institution.

Bank interest is one of the most developed forms of loan interest in the Russian Federation. Occurs if the bank is one of the subjects of credit relations.

When calculating the rate of interest in each specific transaction, a commercial bank takes into account:

The level of the base interest rate, which is calculated on the basis of the real price of raising funds, the level of other expenses of the bank and the planned rate of return on lending operations;

Risk premium subject to the terms of the loan agreement.

Base interest rates are the average interest rates at which loans are made to prime borrowers. They are determined based on the estimated cost of credit investments and the level of profitability of lending operations of a commercial bank for the coming period. Calculated according to the formula:

P base \u003d C 1 + C 2 + P m

Where: P base - base interest rate;

C 1 - the average real price of all credit resources;

C 2 - the ratio of the costs of ensuring the functioning of the bank to the volume of productively placed funds;

P m - the planned level of profitability of the bank's lending operations with a minimum of costs.

The risk premium is differentiated depending on the following criteria:

The creditworthiness of the borrower;

Availability of collateral for the loan;

loan term;

The strength of the relationship between the client and the bank.

Considering that the interest on active operations of the bank plays an important role in generating income, and the payment for attracted resources occupies a significant place in its expenses, the problem of determining the interest margin (M fact), that is, the difference between the average rates on active operations ( loans) (P a) and passive operations of the bank (attracting deposits) (P p):

M fact \u003d P a -P p

The main factors influencing the size of the interest margin are the volume and composition of credit investments and their sources, the terms of payments, the nature of the applied interest rates and their movement.

Depending on the nature of the movement, interest rates can be fixed or floating. The fixed interest rate is set for the entire loan period and is not subject to revision.

A floating interest rate is a rate that constantly changes depending on the situation in the credit markets and in the financial market of the country.

The amount of the loan fee depends on the size of the penalty interest rate. With all the variety of conditions and methods for applying penalty rates, they have certain patterns. Their general purpose is to make it unprofitable to violate contractual obligations.

Depending on the initial base, the amounts for interest calculation distinguish between simple and compound interest.

Simple interest involves applying the rate to the same initial amount throughout the life of the loan. Compound interest is calculated on the amount of interest accrued in the previous period.

The amount of simple interest accrued for the entire term is calculated according to the formula:

I=P×n×i,

where I - the amount of interest for the entire period of use of the loan;

P - the initial amount of debt;

i - interest rate determined by a commercial bank (if the annual interest rate = 20% per annum, then i = 0.2 (20/100);

n is the term of the loan, usually measured in years, and

n=t/K,

where t is the number of loan days;

K - the number of days in a year, which is fixed in the loan agreement. It can be equal to 360 days, then interest is called ordinary or commercial, or 365 (366) days - exact interest. The day of issuance and the day of repayment of the loan is considered as one day.

In the banking practice of different countries, the period in days and the estimated number of days per year in the calculation of interest are determined differently.

In German practice, the calculation of the number of days is based on the length of the year = 360 days, and the month = 30 days

In French practice, the duration of the year = 360 days, and the number of days in a month corresponds to their calendar value (28, 29, 30, 31).

In English practice, a year = 365 (366) days, and the number of days in a month corresponds to their calendar value (28, 29, 30, 31).

The amount of debt for the entire period of using the loan is determined by the formula:

S=P(1+n*i),

where S is the amount at the end of the loan term.

Calculation of compound interest. In long-term financial transactions, when interest is not paid immediately after they are accrued, but is added to the principal amount of the debt, compound interest rates are applied for accrual. The base for compound interest increases with each step in time.

S = P*(1+i)n

The value of the accumulation multiplier depends on the parameters i, n - the number of periods.

Sr = S/I

Where: Sr - the amount of debt adjusted for inflation;

S - the amount of debt with interest, excluding inflation;

I - inflation index

Interest is accrued in the amounts and terms stipulated by the agreement, but at least once a quarter, and is paid in installments according to the schedule of payment (repayment) of the due interest amounts established by the bank.

If the amount contributed by the borrower is insufficient to repay the urgent payment, overdue debt and accrued interest, then the interest is repaid first, then the overdue debt, and the remaining amount is used to repay the principal amount of the debt. This order is stipulated at the conclusion of the contract.

The main factors that a commercial bank takes into account when setting a fee for a loan:

Refinancing rate - the official interest rate on centralized credit resources;

Average interest rate on interbank loans;

The average interest rate paid by the bank to its customers on deposits of various types;

The structure of the bank's credit resources (the higher the share of borrowed funds, the more expensive the loan);

Demand and supply for loans from customers;

The term and types of the loan, or rather the degree of risk for the bank of non-repayment of the loan, depending on the security;

Stability of monetary circulation in the country (the higher the inflation rate, the more expensive the date for the loan);

The nature of the relationship between the lender and the borrower;

Expenses for registration and control over the use and repayment of the loan.

Taking into account the influence of the above factors, the bank independently determines the level of interest rates in such a way that it ensures its profitability and competitiveness in the banking services market.

The construction of an effective interest rate policy of any bank should be based on the need to achieve the maximum attraction of free Money to accounts and receipt by all divisions of the bank of profit, ensuring normal commercial activity jar

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