Many of us are closely watching the economic situation in our country, because it has not been as stable as we would like lately. But looking through the news bulletins, some terms may not be entirely clear, including what is the refinancing rate and the key rate. Even those who understand what it is do not know for sure the main differences between these two concepts, which, by the way, are very close to each other. Let's try to answer as accurately as possible the question of how the key rate differs from the refinancing rate.
Refinancing rate
The Central Bank of Russia, the controlling body, provides cash loans to commercial Russian banks. After all, even credit and financial institutions sometimes need to attract investments from outside in order to implement their credit policy. The most reasonable way out of the situation is to borrow from the Central Bank of Russia at a certain annual percentage. This annual percentage is the refinancing rate.
It is worth noting that this value is not constant, that is, the supervisory authority changes it to regulate the country's domestic financial policy. In simple terms, the lower this indicator, the lower the rates on bank loans, and, accordingly, the cheaper the money. When the inflation rate begins to grow rapidly, the Bank of Russia, on the contrary, raises the rate so that bank loans become less accessible to the population.
The refinancing rate for 2017 is 9%.
key rate
As mentioned earlier, both concepts have a similar meaning. If the previous definition meant the interest rate for issuing long-term loans, then the key rate applies to short-term loans for up to 1 week. That is, the key rate is the percentage at which the Bank of Russia issues loans to commercial banks for up to 1 week.
For individuals or ordinary citizens of our country, the key rate is of practical importance. It is this rate that applies to contracts under which the parties have not reached a mutual agreement on determining the amount of remuneration, in this case the current key rate will be applied. In addition, this indicator determines the fee for the misuse of funds in accordance with Article 395 of the Civil Code.
Please note that the indicator is not fixed, it can change at the initiative of the management of the Central Bank of Russia.
Differences
Thus, we found out what the key rate and the refinancing rate are. What is the difference, because, at first glance, both concepts have great similarities. That is, in fact, both values determine the size of the interest rate at which a commercial bank takes a cash loan from a regulatory authority. But in practice, things are somewhat different.
The concept of the refinancing rate appeared in 1992, during the formation of a new financial system in Russia after the collapse of the Soviet Union. It performs several functions at once, including determining the economic development of the country and calculating taxes and fines on it.
And the key rate is a relatively new concept, it only came out in 2013. The purpose of the creation was to take away the main function from the refinancing rate, that is, to determine the percentage at which commercial banks will receive cash loans.
In order not to get confused what the differences are, it is worth noting that the main function of the key rate is to determine the rate of loans in commercial banks. And the refinancing rate has several other functions:
- It is used to calculate penalties for late payment of tax collection. In simple terms, for non-payment of tax, the taxpayer must pay a fine in the amount of 1/300 of the refinancing rate of the amount owed for each day of delay.
- It depends on it whether it is necessary to pay tax on income from the deposit, if the interest rate on the deposit is more than the refinancing rate plus 5%, then tax must be paid on the amount exceeding it.
- If the lender has not indicated an interest rate in the loan agreement, then the refinancing rate applicable on the date of signing the loan agreement is applied to the borrower.
Summing up, we can say that both concepts are quite difficult to understand for a simple person who is not related to financial activities. But still, it will be useful for everyone to know what it is, why they are needed and who controls it.
The Government has several financial instruments to influence banking policy. In order to influence the country's economy, it is necessary to take into account the factors that help influence the level of interest rates on credit and deposit interest that develop in the country as a result of a market economy.
The Central Bank of the Russian Federation sets the interest rate at which it intends to lend to commercial banking structures. It is she who is called key rate.
Let's consider what it matters, according to what principles it is established, what it affects and how it differs from similar concepts, such as the refinancing rate.
Key rate - credit and deposit instrument
The Central Bank of the Russian Federation approves the key interest rate in two directions:
- the minimum percentage at which he can lend to commercial banks for up to 7 days;
- the maximum interest rate at which the Central Bank can take deposits provided by banks.
REFERENCE! The rate is called the key because of its leading role in setting the interest that banks will assign to any lending operations. It directly affects bank funds and, as a result, the inflation rate in the country.
It can be simplified to define key rate as a "wholesale cost", at which banks, as it were, acquire loans from the Central Bank, and then distribute them at a "retail cost". Naturally, the lower the price in the "wholesale purchase", the more accessible it will be "retail", that is, banks can set a lower loan interest.
History of the Russian key rate
Until September 2013, there was no such thing as a “key rate” in the Russian economic system.
- For the first time, the value of the key rate in the Russian Federation was established in 2013 by a decision of September 13, it was 5.5% per year.
- Almost a year later (03/03/2014) it was raised to 7% per annum. The reason for such a sharp increase was the too rapid annual increase in prices for consumers (more than 6%, while the planned figure did not exceed 4%). In order to bring the situation closer to the planned one by the end of 2014, an increase in the key rate was undertaken.
- The measure taken did not produce the expected effect, inflationary risk remained high. Therefore, the Central Bank of the Russian Federation went for a further increase in the rate - 04/28/2014. it amounted to 7.5% per annum.
- After 3 months, an increase to 8% was again required.
- The progression of inflation forced the level to rise again immediately by 1.5% - this happened on November 05, 2014.
- In December of the outgoing 2014, I had to take emergency drastic measures and first raise the rate by 1%, and then increase it by several points at once - up to 17%. On the exchange, these days received the symbolic names "Black Monday" and "Black Tuesday".
- When the inflationary situation somewhat stabilized, it became possible to reduce the rate, which was done in February 2015. – it became 15%.
- Since March 16, 2015 there was another decrease - up to 14%.
- In April, the key rate lost another 1.5%.
- On June 16, 2015, the rate was 11.5% per year, and already in August it fell to 11%. The Board of Directors of the Central Bank decided to keep it at this level as long as the economic situation allows.
- The established rate lasted for almost a year - until June 13, 2016, when it was reduced by another 0.5%.
- The rate was reduced by another 0.5% in June 2016.
- From September 2016, it was decided to reduce the rate to 10% per year.
- On March 27, 2017, the rate dropped again to 9.75%.
- Another decrease of 0.5% from May 2, 2017.
- A month and a half later, another decrease of 0.5% occurred again.
- Since September 18, by decision of the Bank of Russia, the rate has decreased to 8.50%.
- Since October 30, again a decrease of 0.25 points.
- The sixth reduction of the key rate in 2017 to the level of 7.75% since December 18.
- In February 2018, the rate fell again by 0.25 points.
- In March, the rate continued to fall by another 0.25%.
- The first rate increase of 0.25 points since 2014 happened in August 2018.
- In December 2018, there was another rate increase of 0.25 points.
The same data, but now in a visual pivot table:
| Period | Key rate (%) | Regulatory document |
|---|---|---|
| 12/17/2018 — today | 7,75 | Information from the Bank of Russia dated December 14, 2018 |
| 17.09.2018 — 16.12.2018 | 7,50 | Information from the Bank of Russia dated September 14, 2018 |
| 26.03.2018 — 16.09.2018 | 7,25 | Information from the Bank of Russia dated March 23, 2018 |
| 12.02.2018 — 25.03.2018 | 7,50 | Information from the Bank of Russia dated February 9, 2018 |
| 18.12.2017 — 11.02.2018 | 7,75 | Information from the Bank of Russia dated December 15, 2017 |
| 30.10.2017 — 17.12.2017 | 8,25 | Information from the Bank of Russia dated October 27, 2017 |
| 18.09.2017 — 29.10.2017 | 8,50 | Information from the Bank of Russia dated September 15, 2017 |
| 19.06.2017 — 17.09.2017 | 9,00 | Information from the Bank of Russia dated June 16, 2017 |
| 02.05.2017 — 18.06.2017 | 9,25 | Information from the Bank of Russia dated April 28, 2017 |
| 27.03.2017 — 01.05.2017 | 9,75 | Information from the Bank of Russia dated March 24, 2017 |
| 19.09.2016 — 26.03.2017 | 10,00 | Information from the Bank of Russia dated September 16, 2016 |
| 14.06.2016 — 18.09.2016 | 10,50 | Information from the Bank of Russia dated 06/10/2016 |
| 03.08.2015 — 13.06.2016 | 11,00 | Information from the Bank of Russia dated July 31, 2015 |
| 16.06.2015 — 02.08.2015 | 11,50 | Information of the Bank of Russia dated 06/15/2015 |
| 05.05.2015 — 15.06.2015 | 12,50 | Information from the Bank of Russia dated April 30, 2015 |
| 16.03.2015 — 04.05.2015 | 14,00 | Information from the Bank of Russia dated March 13, 2015 |
| 02.02.2015 — 15.03.2015 | 15,00 | Information from the Bank of Russia dated January 30, 2015 |
| 16.12.2014 — 01.02.2015 | 17,00 | Information from the Bank of Russia dated 12/16/2014 |
| 12.12.2014 — 15.12.2014 | 10,50 | Information from the Bank of Russia dated 11.12.2014 |
| 05.11.2014 — 11.12.2014 | 9,50 | Information from the Bank of Russia dated October 31, 2014 |
| 28.07.2014 — 04.11.2014 | 8,00 | Information of the Bank of Russia dated 25.07.2014 |
| 28.04.2014 — 27.07.2014 | 7,50 | Information from the Bank of Russia dated April 25, 2014 |
| 03.03.2014 — 27.04.2014 | 7,00 | Information of the Bank of Russia dated 03.03.2014 |
| 13.09.2013 — 02.03.2014 | 5,50 | Information from the Bank of Russia dated September 13, 2013 |
NOTE! Based on the level of fluctuations in the key rate, it is easy to make a choice about the degree of stability of the national currency.
The lower the better
The decrease in the key rate reflects the "health" of the economy in the country.
At reduced rates, commercial banks have the opportunity to take more loans from the Central Bank, which means that they can lend more widely and affordably to small and medium-sized businesses.
Businessmen produce more goods and services that the consumer willingly buys, because the supply is large enough, which means that the prices for them are acceptable. This heals the economy and positively affects the well-being of citizens in general.
Key rate increase- it's like a rise in temperature in a patient, speaks of some kind of economic crisis. Loans are getting too expensive. And this means that there is nowhere to take funds for business development. There is a "freeze" of the economy.
Why is the Government raising the key rate?
If raising interest rates is bad for the economy, why bother doing it at all?
Raising the key rate is a forced temporary measure designed to contain inflationary processes, primarily the fall of the national currency.
A high key rate makes commercial banks' currency speculation unprofitable, which thrive on low interest rates. The temptation to take out a loan at a low rate and buy foreign currency with these funds is too great, and at a low loan rate, all commercial banks begin to abuse this operation. And this leads to the fall of the ruble.
Therefore, the Government operates with the level of the key rate in order to balance this process at an acceptable economic level.
Do not confuse the key rate and the refinancing rate
This is another economic instrument, also aimed at lending to commercial banks, but with a slightly different original meaning. Unlike the key one, for a long time it was of a reference nature and could not serve as an indicator of the state's credit policy.
It has been used since 1992, having changed several official names:
- "single interest rate" - telegram of the Central Bank of Russia dated December 29, 1991 No. 216-91;
- "discount rate for centralized credit resources" - telegram of the Bank of Russia dated April 10, 1992 No. 84-92;
- "refinancing rate of commercial banks" - telegram of the Bank of Russia dated May 22, 1992 No. 01-156.
Refinancing rate- the percentage that the Central Bank uses when providing loans to other banking structures. It was not tied to the actual rates for certain banking operations. Application, unlike the key one, was limited to the following areas:
- accrual of interest on deposits in rubles without income tax;
- calculation of tax penalties for delay;
- basis of the tax base for tax on income from interest savings when using borrowed funds;
- to determine the interest on the loan, if it was not specified in the agreement.
IMPORTANT INFORMATION! Since January 1, 2016, the refinancing rate has been brought into line with the key rate, and as of today it is also equal to 7.75% per annum.
History of changes in the refinancing rate
| Period | Refinancing rate (%) | Regulatory document |
|---|---|---|
| 14.09.2012 — 31.12.2015 | 8,25 | Instruction of the Bank of Russia dated September 13, 2012 N 2873-u |
| 26.12.2011 — 13.09.2012 | 8 | Instruction of the Bank of Russia dated December 23, 2011 N 2758-U |
| 03.05.2011 — 25.12.2011 | 8,25 | Instruction of the Bank of Russia dated April 29, 2011 N 2618-U |
| 28.02.2011 — 02.05.2011 | 8 | Instruction of the Bank of Russia dated February 25, 2011 N 2583-U |
| 01.06.2010 — 27.02.2011 | 7,75 | Instruction of the Bank of Russia dated May 31, 2010 N 2450-U |
| 30.04.2010 — 31.05.2010 | 8 | Instruction of the Bank of Russia dated April 29, 2010 N 2439-U |
| 29.03.2010 — 29.04.2010 | 8,25 | Instruction of the Bank of Russia dated March 26, 2010 N 2415-U |
| 24.02.2010 — 28.03.2010 | 8,5 | Instruction of the Bank of Russia dated February 19, 2010 N 2399-U |
| 28.12.2009 — 23.02.2010 | 8,75 | Instruction of the Bank of Russia dated December 25, 2009 N 2369-U |
| 25.11.2009 — 27.12.2009 | 9 | Instruction of the Bank of Russia dated November 24, 2009 N 2336-U |
| 30.10.2009 — 24.11.2009 | 9,5 | Instruction of the Bank of Russia dated October 29, 2009 N 2313-U |
| 30.09.2009 — 29.10.2009 | 10 | Instruction of the Bank of Russia dated September 29, 2009 N 2299-U |
| 15.09.2009 — 29.09.2009 | 10,5 | Instruction of the Bank of Russia dated September 14, 2009 N 2287-U |
| 10.08.2009 — 14.09.2009 | 10,75 | Instruction of the Bank of Russia dated 07.08.2009 N 2270-U |
| 13.07.2009 — 09.08.2009 | 11 | Instruction of the Bank of Russia dated July 10, 2009 N 2259-U |
| 05.06.2009 — 12.07.2009 | 11,5 | Instruction of the Bank of Russia dated 04.06.2009 N 2247-U |
| 14.05.2009 — 04.06.2009 | 12 | Instruction of the Bank of Russia dated May 13, 2009 N 2230-U |
| 24.04.2009 — 13.05.2009 | 12,5 | Instruction of the Bank of Russia dated April 23, 2009 N 2222-U |
| 01.12.2008 — 23.04.2009 | 13 | Instruction of the Bank of Russia dated November 28, 2008 N 2135-U |
| 12.11.2008 — 30.11.2008 | 12 | Instruction of the Bank of Russia dated November 11, 2008 N 2123-U |
| 14.07.2008 — 11.11.2008 | 11 | Instruction of the Bank of Russia dated July 11, 2008 N 2037-U |
| 10.06.2008 — 13.07.2008 | 10,75 | Instruction of the Bank of Russia dated 09.06.2008 N 2022-U |
| 29.04.2008 — 09.06.2008 | 10,5 | Instruction of the Bank of Russia dated April 28, 2008 N 1997-U |
| 04.02.2008 — 28.04.2008 | 10,25 | Instruction of the Bank of Russia dated February 1, 2008 N 1975-U |
| 19.06.2007 — 03.02.2008 | 10 | Telegram of the Bank of Russia dated June 18, 2007 N 1839-U |
| 29.01.2007 — 18.06.2007 | 10,5 | Telegram of the Bank of Russia dated January 26, 2007 N 1788-U |
| 23.10.2006 — 28.01.2007 | 11 | Telegram of the Bank of Russia dated October 20, 2006 N 1734-U |
| 26.06.2006 — 22.10.2006 | 11,5 | Telegram of the Bank of Russia dated June 23, 2006 N 1696-U |
| 26.12.2005 — 25.06.2006 | 12 | Telegram of the Bank of Russia dated December 23, 2005 N 1643-U |
| 15.06.2004 — 25.12.2005 | 13 | Telegram of the Bank of Russia dated June 11, 2004 N 1443-U |
| 15.01.2004 — 14.06.2004 | 14 | Telegram of the Bank of Russia dated January 14, 2004 N 1372-U |
| 21.06.2003 — 14.01.2004 | 16 | Telegram of the Bank of Russia dated June 20, 2003 N 1296-U |
| 17.02.2003 — 20.06.2003 | 18 | Telegram of the Bank of Russia dated February 14, 2003 N 1250-U |
| 07.08.2002 — 16.02.2003 | 21 | Telegram of the Bank of Russia dated 06.08.2002 N 1185-U |
| 09.04.2002 — 06.08.2002 | 23 | Telegram of the Bank of Russia dated April 8, 2002 N 1133-U |
| 04.11.2000 — 08.04.2002 | 25 | Telegram of the Bank of Russia dated November 3, 2000 N 855-U |
| 10.07.2000 — 03.11.2000 | 28 | Telegram of the Bank of Russia dated July 7, 2000 N 818-U |
| 21.03.2000 — 09.07.2000 | 33 | Telegram of the Bank of Russia dated March 20, 2000 N 757-U |
| 07.03.2000 — 20.03.2000 | 38 | Telegram of the Bank of Russia dated March 6, 2000 N 753-U |
| 24.01.2000 — 06.03.2000 | 45 | Telegram of the Bank of Russia dated January 21, 2000 N 734-U |
| 10.06.1999 — 23.01.2000 | 55 | Telegram of the Bank of Russia dated 09.06.99 N 574-U |
| 24.07.1998 — 09.06.1999 | 60 | Telegram of the Bank of Russia dated July 24, 1998 N 298-U |
| 29.06.1998 — 23.07.1998 | 80 | Telegram of the Bank of Russia dated June 26, 1998 N 268-U |
| 05.06.1998 — 28.06.1998 | 60 | Telegram of the Bank of Russia dated 04.06.98 N 252-U |
| 27.05.1998 — 04.06.1998 | 150 | Telegram of the Bank of Russia dated May 27, 1998 N 241-U |
| 19.05.1998 — 26.05.1998 | 50 | Telegram of the Bank of Russia dated May 18, 1998 N 234-U |
| 16.03.1998 — 18.05.1998 | 30 | Telegram of the Bank of Russia dated March 13, 1998 N 185-U |
| 02.03.1998 — 15.03.1998 | 36 | Telegram of the Bank of Russia dated February 27, 1998 N 181-U |
| 17.02.1998 — 01.03.1998 | 39 | Telegram of the Bank of Russia dated February 16, 1998 N 170-U |
| 02.02.1998 — 16.02.1998 | 42 | Telegram of the Bank of Russia dated 30.01.98 N 154-U |
| 11.11.1997 — 01.02.1998 | 28 | Telegram of the Bank of Russia dated 10.11.97 N 13-U |
| 06.10.1997 — 10.11.1997 | 21 | Telegram of the Bank of Russia dated 01.10.97 N 83-97 |
| 16.06.1997 — 05.10.1997 | 24 | Telegram of the Bank of Russia dated 13.06.97 N 55-97 |
| 28.04.1997 — 15.06.1997 | 36 | Telegram of the Bank of Russia dated April 24, 1997 N 38-97 |
| 10.02.1997 — 27.04.1997 | 42 | Telegram of the Bank of Russia dated 07.02.97 N 9-97 |
| 02.12.1996 — 09.02.1997 | 48 | Telegram of the Bank of Russia dated November 29, 1996 N 142-96 |
| 21.10.1996 — 01.12.1996 | 60 | Telegram of the Bank of Russia dated 10/18/96 N 129-96 |
| 19.08.1996 — 20.10.1996 | 80 | Telegram of the Bank of Russia dated 16.08.96 N 109-96 |
| 24.07.1996 — 18.08.1996 | 110 | Telegram of the Bank of Russia dated July 23, 1996 N 107-96 |
| 10.02.1996 — 23.07.1996 | 120 | Telegram of the Bank of Russia dated 09.02.96 N 18-96 |
| 01.12.1995 — 09.02.1996 | 160 | Telegram of the Bank of Russia dated November 29, 1995 N 131-95 |
| 24.10.1995 — 30.11.1995 | 170 | Telegram of the Bank of Russia dated October 23, 1995 N 111-95 |
| 19.06.1995 — 23.10.1995 | 180 | Telegram of the Bank of Russia dated June 16, 1995 N 75-95 |
| 16.05.1995 — 18.06.1995 | 195 | Telegram of the Bank of Russia dated May 15, 1995 N 64-95 |
| 06.01.1995 — 15.05.1995 | 200 | Telegram of the Bank of Russia dated 05.01.95 N 3-95 |
| 17.11.1994 — 05.01.1995 | 180 | Telegram of the Bank of Russia dated November 16, 1994 N 199-94 |
| 12.10.1994 — 16.11.1994 | 170 | Telegram of the Bank of Russia dated 11.10.94 N 192-94 |
| 23.08.1994 — 11.10.1994 | 130 | Telegram of the Bank of Russia dated 22.08.94 N 165-94 |
| 01.08.1994 — 22.08.1994 | 150 | Telegram of the Bank of Russia dated July 29, 1994 N 156-94 |
| 30.06.1994 — 31.07.1994 | 155 | Telegram of the Bank of Russia dated June 29, 1994 N 144-94 |
| 22.06.1994 — 29.06.1994 | 170 | Telegram of the Bank of Russia dated June 21, 1994 N 137-94 |
| 02.06.1994 — 21.06.1994 | 185 | Telegram of the Bank of Russia dated 01.06.94 N 128-94 |
| 17.05.1994 — 01.06.1994 | 200 | Telegram of the Bank of Russia dated May 16, 1994 N 121-94 |
| 29.04.1994 — 16.05.1994 | 205 | Telegram of the Bank of Russia dated April 28, 1994 N 115-94 |
| 15.10.1993 — 28.04.1994 | 210 | Telegram of the Bank of Russia dated 14.10.93 N 213-93 |
| 23.09.1993 — 14.10.1993 | 180 | Telegram of the Bank of Russia dated September 22, 1993 N 200-93 |
| 15.07.1993 — 22.09.1993 | 170 | Telegram of the Bank of Russia dated July 14, 1993 N 123-93 |
| 29.06.1993 — 14.07.1993 | 140 | Telegram of the Bank of Russia dated June 28, 1993 N 111-93 |
| 22.06.1993 — 28.06.1993 | 120 | Telegram of the Bank of Russia dated June 21, 1993 N 106-93 |
| 02.06.1993 — 21.06.1993 | 110 | Telegram of the Bank of Russia dated 01.06.93 N 91-93 |
| 30.03.1993 — 01.06.1993 | 100 | Telegram of the Bank of Russia dated March 29, 1993 N 52-93 |
| 23.05.1992 — 29.03.1993 | 80 | Telegram of the Bank of Russia dated May 22, 1992 N 01-156 |
| 10.04.1992 — 22.05.1992 | 50 | Telegram of the Bank of Russia dated April 10, 1992 N 84-92 |
| 01.01.1992 — 09.04.1992 | 20 | Telegram of the Bank of Russia dated December 29, 1991 N 216-91 |
By the way, our special
Key rate in other countries
In countries with a stable developed economy, the key rate is very low or even zero. For example, in Norway its value is 1.25%, in Canada it is 1%, it is only 0.5% in the UK, a quarter of a percent in the USA. One tenth of a percent is the key rate in Japan, and EU banks are credited at one hundredth of a percent. In Sweden and Switzerland, this percentage is 0.
There is something to strive for, right?
Key rate and refinancing rate: the differences between these concepts are significant, despite the similarity of the terms. Let's figure out what they mean and what impact these phenomena have on the economy?
The terms are interrelated, they are directly related to the Central Bank, because these are instruments of the state's credit policy. These parameters are accounting, that is, they can be used to judge the value of money at one time or another.
Definition of terms
What is the difference between the key rate and the refinancing rate? To understand the differences, you must first give a definition of these concepts.
KS is an indicator of the minimum percentage at which the Central Bank issues short-term loans to banks. At the same time, this is the maximum indicator at which the Central Bank is ready to accept funds for deposits from credit institutions. This value plays a leading role in shaping the conditions for granting loans to the population and business entities, thus affecting inflation.
SR is the annual percentage paid by credit institutions to the Central Bank for loans. This indicator is widely used to calculate fines and penalties. Also, in fact, no bank will issue a loan lower than the SR. When is the refinancing rate or key rate used?
Policy change by the Central Bank, background
The key rate of the Central Bank and the refinancing rate: the differences and similarities of these terms can be traced by changes in legislation. Until 2013, there was no such thing as a CC in Russian legislation. On the contrary, the introduction of SR in 1992 played an important role. Then, on September 13, 2013, the Central Bank simultaneously introduces the CA to control inflation and increase investment attractiveness, its size is determined at that time - 5.5%. Over the following years, there was an indicator, and then a gradual decrease.
The impact of the CS on the economy is as follows - it:
- forms the amount of bank loans to the population and business entities;
- serves as a tool for adjusting the level of inflation;
- determine the amount of resources attracted by the bank:
- is an indicator of the cost of borrowed funds.
The key rate instead of the refinancing rate was finally introduced into all legislative acts from January 1, 2016.
If the Central Bank decides to lower the inflation rate, then the COP rises. The mechanism is as follows: after the increase in the CA, the interest on deposits and loans issued by credit institutions increases. Further, purchasing power falls due to lack of funds, the pressure of the ruble decreases and inflation growth rates fall.
Another mechanism was used in 2014, when the Central Bank decided to raise the COP immediately by 70%. This decision led to the unavailability of short-term loans for many banks, which reduced the volume of speculation in the foreign exchange market, which contributed to the growth of the dollar. The decrease in the CA serves as an incentive for lending and activation of the real sector of the economy. This method is used if the country is experiencing stagnation, a decline in business activity.
Role of the SR
At the moment, the practical significance of SR is as follows:
- determines the need for taxation on deposits in domestic and foreign currency, in the event that their percentage exceeds the CP by 5% (for deposits in foreign currency - by 9%);
- serves to calculate the penalty charged for the payment of tax fees (1/300 and 1/150);
- if the agreement does not specify the amount of liability, interest for non-fulfillment of obligations, they are determined by the level of the Central Bank;
- is used when calculating the amount of penalties imposed on the administration of the employer for each day of delay in the payment of wages, other accruals to employees (1/300).
Size
Both the key and the refinancing rate of the Central Bank are equated in terms of values today. This also happened from January 1, 2016, since the SR was much lower than the CA, which led to the fact that it became unprofitable for borrowers to fulfill their obligations. The COP for today is 7.75 according to the last change from 12/14/2018.
Our portal monitors changes in these indicators and publishes up-to-date data.
Base discount rates and, in combination, the levers of control of the financial sector - the key rate and the refinancing rate.
The differences between the rates are imperceptible in the opinion of the average layman, and they are not included in the circle of his informational interests.
However, everything in our life depends on them - prices, wages, inflation, standard of living.
The refinancing rate is the interest on long-term lending by the Central Bank to commercial banks; acted as the main account - until September 2013.
After that, this function was transferred to the key rate, leaving it only to participate in the calculation of fines and penalties.
The key rate is the annual interest on weekly bank loans at the Central Bank; since 2013, it has been the main percentage indicator that regulates the country's economy.
To date, these rates are equal.
Key rate and refinancing rate - differences and similarities
In domestic banking terminology, there are two concepts that characterize the cost of liquidity provided by the Central Bank: the refinancing rate and the key interest rate. Despite the fact that these concepts are close to each other in meaning, their meanings are not identical and have a number of fundamental differences. So, let's see what exactly their similarities are, and what is their difference.
The Law "On the Central Bank of the Russian Federation (Bank of Russia)" No. 86-FZ defines the main instruments of the country's monetary policy, including the setting of interest rates on the operations of the Central Bank of the Russian Federation, and the refinancing (crediting) of banks, and the implementation of operations on the open market, and a number of others.
At a meeting of the Board of Directors of the Bank of Russia, the official interest rate for providing resources to credit institutions is set, on the basis of which the scale of interest rates for Central Bank operations is already being formed. Based on the orientation of monetary policy in the use of one or another of its instruments, the main bank interest rate may have a different name: refinancing rate, discount rate, key rate.
Definition and application
For the first time, as an instrument for regulating the policy of the Central Bank, the refinancing rate was established by the Telegram of the Central Bank of December 29, 1991 No. 216-91 and was put into effect on January 1, 1992. She determined the cost of loans from the Bank of Russia for all commercial banks in the country.
Since then, the refinancing rate began to reflect the level of payment for credit resources provided by the Central Bank of the Russian Federation to other banks, in other words, to characterize the lending operations of the Central Bank or refinancing operations.
Refinancing of the banking sector can be carried out through the provision of intraday loans, overnight loans, pawn loans, as well as loans secured by gold or non-marketable assets of the Central Bank.
Since 2003, after the publication of the CBR Telegram No. 1296-U, the refinancing rate began to determine the upper limit of interest rates on active operations (liquidity provision operations) of the Central Bank in the money market, since rates on overnight loans (overnight loans) were brought to its level ").
Thus, the refinancing rate is an annual percentage indicator that characterizes the payment for credit resources provided by the Central Bank (refinancing). Determining this or that value, the Central Bank influenced the level of interest rates on interbank transactions, as well as on bank deposits and loans.However, in addition to the main function of economic regulation, the refinancing rate also performs additional functions. In particular, it is used in calculations of taxes and fees, is used under the terms of contracts to calculate penalties, to calculate penalties and forfeits on taxes, fines, court orders and other payments.
Until September 13, 2013, the refinancing rate was of decisive importance for designating the vector of the country's economic development. However, with the introduction in September 2013 by the Board of Directors of the Bank of Russia of the key interest rate (Information of the Bank of Russia dated September 13, 2013), the discount rate assumed secondary importance, performing only its additional functions (for example, fiscal).
Fiscal meaning of the refinancing rate
The Tax Code contains numerous references to the use of the Central Bank's refinancing rate in calculations. Those. in accordance with the provisions of the Tax Code, it is used to calculate taxes payable, as well as fines and penalties on them. This shows its fiscal meaning.
Most often, the refinancing rate is used to determine:
- taxable base on income received in the form of material benefits from savings on interest on loans (Article 212 of the Tax Code of the Russian Federation).
- personal income taxable income on bank deposits (Article 214.2 of the Tax Code of the Russian Federation, clause 27 of Article 217 of the Tax Code of the Russian Federation);
- income and reasonable expenses for the purpose of calculating corporate income tax. In particular, for calculating interest expenses on debt obligations and the range of their allowable values (Article 269 of the Tax Code of the Russian Federation). However, the changes made to Art. 269 of the Tax Code of the Russian Federation by the Federal Law of March 8, 2015, established in some cases the application for calculating the interval of the key rate of the Bank of Russia;
- penalties for late payment of taxes (parts 1 and 2 of the Tax Code of the Russian Federation).
Key rate of bank interest
The key rate is the interest rate for the provision and withdrawal of liquidity by the Central Bank on an auction basis for up to seven days.
It was put into effect on September 13, 2013 in order to improve the methods of regulating the monetary policy of the Central Bank of the Russian Federation, and has since been used as its main instrument (Central Bank Information "On the system of interest rate instruments of monetary policy" dated September 13, 2013 ).
The mechanism for using the key rate implies the influence of the Bank of Russia on short-term transactions (from 1 to 7 days). According to the Information of the Central Bank of the Russian Federation dated September 13, 2013, at the key rate, the Central Bank provides banks with liquidity on the basis of REPO auctions for a period of one week - to securities purchase and sale transactions.
Together with the definition of the key rate, the Bank of Russia also introduces the concept of an interest rate corridor, the width of which is two percentage points. The upper and lower limits of the interest corridor are operations at fixed interest rates to provide and withdraw liquidity, respectively.
The key rate determines the middle of the corridor. In addition, floating borrowing rates are also linked to the key rate.
By raising or lowering the key rate, the Central Bank influences the level of money market interest rates, and, consequently, the level of bank liquidity, the volume of money supply in the economy, the inflation rate and economic growth rates.
Differences
Thus, both the refinancing rate and the key interest rate are the main monetary policy instruments of the Bank of Russia, applied in different periods of time, and in a certain way describing the cost of liquidity provided to banks.
The salient features of these two concepts are presented below:
According to the Information of the Central Bank "On the system of interest rate instruments of the monetary policy of the Bank of Russia" dated September 13, 2013 and published by the Bank of Russia "The main directions of the unified state monetary policy for 2015 and the period of 2016 and 2017" the key rate is decisive in shaping the policy of the Central Bank. At the same time, the refinancing rate is only of secondary importance, performing its additional functions.
Source: "kibanki.com"
Comparison of two monetary and credit policy instruments
The leverage rates of financial activity are not included in the information circle of 90% of citizens of any country in the world, but they directly affect prices, wages, and the general standard of living in the country. By and large, it is hard to imagine that in the life of an ordinary city dweller does not depend on these rates.
At first glance, the refinancing rate and the key rate are almost identical, but for a competent economist the differences are huge, so this article will be devoted to the analysis of the subtleties and nuances, and will consist of definitions of each concept and a point-by-point analysis of the discrepancies.
What it is
One way or another, refinancing, as covering old loans with new loans, is as old as the money itself, and was known as far back as ancient Babylon. We are interested in the process in which the Central Bank or a similar body lends to other banks to meet their needs, mainly loans.
In practice, it looks like this. To give a loan, a bank must have a financial resource (usually deposits are considered under it), however, the deposit mass is changeable and can fluctuate greatly. This leads to the inability to service loans, issue new ones, and sometimes return deposits, that is, to bankruptcies.
Therefore, banks resort to refinancing, take a loan from the central bank, and add the amount of the loan to the amount of the deposit portfolio. The annual interest on this loan is just called the refinancing rate. It, like any interest on a loan, is the main parameter of the attractiveness of this type of loans.But it is also included in the formulas for calculating various kinds of interest, penalties and fines. And it is an important indicator for calculations in models of theoretical economics. The refinancing rate is a standard global practice in the banking environment.
The key rate is the minimum percentage at which the Central Bank of the Russian Federation provides loans to banks on the basis of REPO auctions for a period of 1 week (7 days), and it is also the maximum rate of deposits in the Central Bank of the Russian Federation for commercial banks.
It was put into effect on September 13, 2013. This information is set out in the document "On the system of interest rate instruments of monetary policy" dated September 13, 2013.
Also, along with the introduction of the key rate, the concept of an interest rate corridor was introduced into the legal field, which is a step of two percentage points from the key rate in both directions. Floating borrowing rates are also tied to the key rate.
Thus, both rates are tools for regulating the monetary policy of the Central Bank of the Russian Federation at different times.
Main differences
Although representing almost similar concepts, and being a tool for regulating monetary and credit policy in the Russian Federation, it makes sense to distinguish between these two concepts.
In addition, in connection with Bank of Russia Directive No. 3894-U, dated December 11, 2015, “On the Bank of Russia Refinancing Rate and the Key Rate of the Bank of Russia”, effective January 1, 2016, the value of the Bank of Russia refinancing rate is equal to the value of the Bank of Russia key rate determined at the date.And from 06/14/2016 both rates are equal to 10.5% per annum.
Below are the main differences:
- Basic meaning. If the refinancing rate showed the upper marginal rate on the operations of the Central Bank of the Russian Federation, then the key rate determines the corridor in which there are prices at which the Central Bank of the Russian Federation intervenes in financial life through the provision and withdrawal of liquidity from circulation.
- Conducted operations. If the Refinancing Rate was triggered through intraday loans, pawn loans, loans against precious metals and non-marketable assets, and overnight loans. Then the key rate is used at REPO auctions for a period of 7 calendar days.
- Additional features. The refinancing rate, in addition to being used in statistical and theoretical economics, has been used in many fiscal and other similar operations, for example:
- The daily penalty for late payment of taxes and fees, as well as penalties for each day of delay in payment of wages, vacation pay, sick leave and other accruals, is 1/300 of the refinancing rate.
- The need to pay tax on deposits is defined as a rate of + 5% in rubles and a rate of + 9% in foreign currency.
- If the interest was not specified when drawing up the loan agreement, then it is equal to the refinancing rate on the day the agreements were concluded.
- The key rate determines only the regulated (Article 296 of the Tax Code of the Russian Federation) intervals of the maximum values of debt obligations.
Period of application and legislative acts
- The refinancing rate was introduced on January 1, 1992 by the CBR telegram dated December 29, 1991 No. 216-91 and ceased to be valid on September 13, 2013.
- And the key rate is valid from September 13, 2013 to the present and was introduced by the information "On the system of interest rate instruments of monetary policy" dated September 13, 2013.
Thus, although they currently have the same value, these rates represent different economic instruments that should not be mixed.
Source: "vchemraznica.ru"
Credit rates of the Central Bank of Russia
Recently, due to the developing global financial crisis, more and more people are becoming interested in the economy, its indicators, terms and concepts. In this regard, many questions arise, among which one of the leading places is the difference between the refinancing rate and the key rate. First, let's decipher these concepts.
The key rate is an indicator that determines the amount of the Central Bank's interest on short-term weekly loans provided to banks.
Also, this value is decisive for the deposits that the Central Bank accepts from banking institutions. This indicator is the main regulator of inflation and investment attractiveness.
The refinancing rate is the annual interest rate on loans borrowed by credit institutions from the Central Bank of Russia. Today, the role of this financial and economic indicator is secondary; it is used to calculate fines and penalties.
Impact of changes in the lending rate of the Central Bank of Russia
Until 2013, there was no such thing as a discount key rate in the Russian economy. Instead, the key role was played by the refinancing rate, which was first introduced in 1992. On September 13, 2013, in order to control inflation and increase investment attractiveness, the Central Bank simultaneously introduces a key rate and determines its size at 5.5%.
Until December 2014, statistics recorded an increase in this indicator, after which a gradual decrease to 11% began. The impact of the key rate on the economy is as follows. It forms the amount of bank loans that are issued to individuals and legal entities.
In addition, inflation is adjusted with its help, and the volume of resources attracted by commercial banks is determined. To reduce inflation, the Central Bank uses an increase in the key rate. The mechanism of influence can be understood as follows.The consequence of the increase is a change towards an increase in the rate on deposits and loans, including mortgages, which are provided by banks. Naturally, purchasing power is falling, ruble pressure is decreasing, and inflation is slowing down. This is one of the options for applying an increased key rate. Another could be observed at the end of 2014.
Then the Central Bank decided to raise its value by 70% from 10.5 to 17%. This move significantly limited access to short-term lending for commercial banks.
The result was a decrease in the number and volume of speculation in the foreign exchange market, which contributed to the growth of the dollar and inflation, due to the lack of borrowed ruble stock.
If the country's economy is in a state of stagnation, production and business activity are reduced, and because of this, deflation begins, a decision is made to reduce the rate. This reduces the cost of a bank loan, which, in turn, stimulates lending to the real sector of the economy.
What is the role of the refinancing rate
To date, its practical role is as follows:
- Determines the need for taxation on deposits in rubles and foreign currency, if their interest rate exceeds the refinancing rate by 5% (in the case of deposits in foreign currency - by 9%).
- Calculation of the daily penalty charged for late payment of tax dues. It is calculated as 1/300 of the refinancing rate.
- If the amount of accrued interest was not specified in the loan agreement, they are determined by the level of the refinancing rate on the date of conclusion of the agreement.
- Calculation of the amount of penalties imposed on the employer for each day of delay in the payment of wages, vacation, sick leave and other accruals to employees. It is also equal to 1/300 of a part.
Until 2013, she played a key role in the conduct of monetary policy. The year 1998 can serve as a historical example of her work. The Central Bank of Russia used the size of the refinancing rate to correct the financial sector of the Russian economy.
Starting from May and up to the crisis that engulfed the Russian economy in August, the refinancing rate was raised several times. In this way, the Central Bank stimulated the purchase of new government securities, demonstrating a high level of their profitability.However, the outbreak of the crisis showed the ineffectiveness of such actions, so it was decided to revise the monetary policy, soften it and lower the rate.
The difference between the rates
Until the autumn of 2014, when there was a significant jump in the size of the key rate, the values of both these indicators did not differ significantly from each other. But the collapse of oil on world markets and the subsequent fall of the Russian currency forced to raise the discount rate, significantly increasing its gap with the refinancing rate, which today is 8.8%.
This resulted in a contradictory situation. The relatively low refinancing rate made it unprofitable for borrowers to fulfill their debt service obligations.
The late payment penalty turned out to be significantly lower than the refinancing rate. That is, it has become more profitable for creditors to accumulate a penalty than to take a new loan to pay off current obligations.
An increase in the refinancing rate to the level of the key rate can correct this situation. This will increase the amount of interest charged to the level of interest on loans, which should encourage borrowers to pay rather than accumulate debt.
The current policy pursued by the Central Bank suggests that at the moment the problem of growing arrears is lower than the ability to manage inflation in the country.
Source: "banki-v.ru"
Differences between the refinancing rate and the key rate
On the night of December 15-16, 2014, the Central Bank of the Russian Federation raised the key rate from 10% to 17% per annum, which caused a sharp rise in the ruble against the dollar and the euro. At the same time, it turned out that many people confuse the key rate and the refinancing rate, which has a greater impact on the economy.
Below it is written in detail how the refinancing rate differs from the key rate of the Central Bank.
The key rate, which was raised on December 16, is the rate at which the Central Bank of the Russian Federation (the main monetary organization of Russia) gives banks loans for one week, and the rate at which it is ready to accept money for deposits. In 2016, it was planned that it would equalize with the refinancing rate.The refinancing rate is the "main" rate in the Central Bank of the Russian Federation. It is on her that the calculation of penalties and fines in Russia depends. And it is at this rate that ordinary banks return the money borrowed from the Central Bank when the loan term approaches. In fact, a bank that took out a loan of 100 million rubles at the beginning of the year undertakes to return to the Central Bank 100 million rubles and interest at the refinancing rate in a year.
Most of the loans taken by people and legal entities are tied to it, because ordinary banks issue loans that are higher than the refinancing rate, because this is what they earn money on.
The key rate regulates the short-term relationship between the Central Bank and banks and affects how much banks will pay for money taken for a short period.
Now, with the growth of the key rate, banks have lost the opportunity to take money from the Central Bank and buy foreign currency from the population with the money received, which led to a sharp jump in the exchange rate, along with other reasons.
From all this, two conclusions follow:
- Banks have lost the opportunity to speculate on the growth of the exchange rate.
- Loans will rise in price, because banks, when calculating interest on a loan, are guided by the key rate.
Source: "playittodeath.ru"
What is common and what is the difference between the key rate and the refinancing rate of the Bank of Russia
I will try to explain what is the difference between the key rate and the refinancing rate of the Bank of Russia. But first, it is worth noting what they have in common. Both of these rates are the discount rates that the Central Bank of the Russian Federation has used or is using as its tools in monetary policy.
Both that, and that to a different extent (and in different conditions) reflected or reflect cost of money (or influence their cost) in economy at a certain moment. And if before the main discount rate was the refinancing rate, since September 13, 2013, the key rate of the Bank of Russia has become such.Key rate The key rate of the Central Bank of the Russian Federation was officially announced for the first time as the main instrument of monetary policy on September 13, 2013. Then, at the Board of Directors of the Bank of Russia, a new macroeconomic concept was introduced - the “Key Rate”, and the approach to monetary policy instruments was also changed.
The key rate is the rate set by the Bank of Russia in order to have a direct or indirect impact on the level of interest rates in the country's economy, which occurs through lending by the Bank of Russia to commercial banks.
It is defined as the interest rate for operations providing and absorbing liquidity on an auction basis for a period of 1 week.
That is, this is the rate at which the Central Bank lends to commercial banks and accepts deposits from them for this period. The main task of the key rate is to influence the economy in order to achieve the planned level of inflation.
History of changes in the key rate of the Central Bank of the Russian Federation
The refinancing rate is the main (until September 13, 2013) of discount rates, a financial benchmark, an indicator that was used by the Bank of Russia to assess the current value of money in the economy. The rate determined the amount of interest on an annualized basis payable to the Central Bank of the country for loans provided by the Central Bank to credit institutions.
At the moment, it is not formally tied to the actual rates at which the Central Bank lends to commercial banks. The main task of the refinancing rate is an assessment (landmark) of the current value of money and an indicator for the purposes of accounting and taxation.Currently, this indicator is mainly used in many areas of accounting and taxation, in particular:
- for calculating penalties for arrears in the payment of taxes and fees (clause 4, article 75 of the Tax Code of the Russian Federation);
- for calculating interest when granting a deferral or installment payment of taxes and fees (clause 4, article 64 of the Tax Code of the Russian Federation), providing a tax credit (clause 5, article 65 of the Tax Code of the Russian Federation);
- for calculating interest in case of delay by the tax authorities in returning the overpaid tax or fee (clause 9, article 78 of the Tax Code of the Russian Federation);
- to calculate penalties in case of violation by the bank of the deadline for the execution of the client's payment order for the payment of taxes (fees) (clause 1, article 133 of the Tax Code of the Russian Federation);
- in some cases, the refinancing rate is used to determine the amount of material benefits received by the taxpayer for tax purposes, as well as in many other cases.
The Bank of Russia equated the refinancing rate to the key
The Board of Directors of the Central Bank of the Russian Federation decided to equate the refinancing rate (8.25%) from January 1, 2016 to the key rate of the Central Bank (11%). In the future, it is planned to change the refinancing rate only at the same time with a change in the key rate by the same value. The very value of the refinancing rate in the future will no longer be set independently.
This is precisely the very moment when these two rates concern us directly, if we are talking about our relationships with banks. Also, the current reduction of the refinancing rate to the key one means that from January 1, the amount of penalties and fines for late taxes, housing and communal services and other everyday payments will increase significantly. Since they are tied to the Central Bank refinancing rate in the Tax, Housing and Civil Codes.
So, if you or your company suddenly has a tax debt, now you will calculate penalties not at 8.25% per annum, but at 11%. Let's say you need to pay 40 thousand rubles of tax, but you are 40 days late with payment.
Until January 1, 2016, penalties to the Pension Fund for insurance contributions and tax authorities amounted to 440 rubles. Now - 513 rubles, having increased by 25-30 percent.
Let me remind you that in September 2013 the Central Bank of Russia introduced a new value - the key rate - as the main indicator of monetary policy. She announced the interest rate at which the Central Bank provides loans to commercial banks on credit for one week, and at the same time is ready to accept funds from banks for deposits.
In 2013, this rate was 5.5%. Then the Bank of Russia warned that by January 1, 2016 they would equate the refinancing rate (both then and now - 8.25%) to the key rate. And they gave the executive and legislative authorities 2.5 years to bring laws and government documents into line, where the concept of "refinancing rate" appears.
So far, the concept of a key rate has not been used in Russian legislation. Therefore, based on the letter of the law, deputies will either have to amend the articles of federal laws, replacing the concept of "refinancing rate" with the "key rate".Or, as the Central Bank has already done, raise the refinancing rate to 11%, which will not require the adoption of a separate federal law, lawyers explain (though later this figure will have to be constantly adjusted, since the Central Bank considers changing it once a month).
Source: "zgoba.ru"
The key rate of the Central Bank of the Russian Federation and the refinancing rate
The currency crisis in Russia is a topic that interests many today. The crisis started in 2014, when developed countries imposed sanctions against the Russian Federation. This led to the fact that in the fall of 2014 the Russian ruble suffered a strong weakening compared to the dollar and the euro. December 2014 - in order to stop the fall of the ruble, the Central Bank of Russia raises the key rate from 10.5% to 17 per annum.
In many, the percentage reached 20%, and in some, even exceeded. Naturally, residents cannot but worry about the question of how to pay taxes.
What is the difference
After the increase in the key tariff began, people who were not even connected with the topic of finance began to be frightened by this issue, and everyone wanted to figure out what was the matter. The general public needs to explain such concepts in simple terms.
The refinancing rate is required to calculate penalties and fines. Also, you can not do without this concept, calculating taxes on bank deposits. At the moment, the refinancing rate is not tied to actual rates. The key rate is the cost at which any commercial bank receives loans from the Central Bank of the country. Under the same conditions, the Central Bank agrees to accept deposits from the same banks.
It is the key - the main percentage indicator, with the help of which the country's economy is regulated. By sharply increasing the percentage, the Central Bank made attempts to save and stabilize the situation on the foreign exchange market.
Refinancing rate
What is its main essence? The role of refinancing can be described in terms of the following points:
- Determines whether there is a need for taxation for deposits in rubles and foreign currency, if their interest value is already higher by 5%.
- When taxes are not paid on time, it helps to calculate the daily interest, payment deferrals, etc.
- When the money contract does not describe the amount of interest, they are taken from the level of the cost of refinancing at the time of the conclusion of the contract.
- Penalties are calculated for non-payment of salaries, sick leave, etc. to employees.
- Due to the crisis, this tariff was raised several times to help correct the financial situation in the country and stabilize the inflation rate.
The refinancing rate has remained unchanged since September 14, 2012. It is 8.25%, but rose to 8.8%.
Inflation
Before the crisis, which began in the fall of 2014, these indicators did not differ much from each other. But the change in the situation and inflation made it necessary to raise the annual percentage - the main credit instrument, which led to a significant gap. Now, these concepts will differ from each other.
What led to this situation? It became unprofitable for borrowers to pay on debt obligations, and it was cheaper to accumulate a penalty, because a penalty is cheaper than on-lending. Only raising and comparing the two rates could change the situation. This increase is planned to be used especially for 2016.Thus, studying the policy pursued by the Central Bank at the moment, it can be said with certainty that the problem of growing non-payments is growing, as is the complexity of managing inflation in the country.
Will the Central Bank provide loans
Starting from 2016, the main Central Bank plans to adjust both concepts so that the CS and SR are on the same level. The natural outcome of the case was the raising of interest rates for the population by commercial banks. Thus, deposits in rubles that exceed the SR by 5% should be taxed. The situation for depositors is not the most pleasant - they will have to pay a tax of more than 35%.
The Board of Directors of the Central Bank of Russia expressed a unanimous opinion that the discount key rate should be kept at the level of 11% per annum.
Oil prices are very volatile, which also leads to an increase in consumer prices. The situation on the world market for raw materials is deteriorating, which means that the Russian economy must adapt.
In case of further deterioration of the situation and the emergence of new inflationary risks, the credit policy will be tightened by the Central Bank of the country. At the next meeting of directors, which took place on March 18, 2016, the issue of the level of the key tariff was submitted for reconsideration.
Source: "spasfinans.ru"
Monetary policy indicators
The indicators of the state's monetary policy are the key rate and the refinancing rate of the Central Bank of the Russian Federation.
Key rate of the Central Bank of the Russian Federation
The key rate was introduced by the Bank of Russia on September 13, 2013 as the main indicator of monetary policy:
Refinancing rate of the Central Bank of the Russian Federation
The refinancing rate was introduced on January 1, 1992 as a single rate for granting loans to commercial banks. Since January 1, 2016, the value of the refinancing rate has been equated to the value of the key rate of the Bank of Russia:
Source: "base.garant.ru"
What is the difference between the two base rates of the Central Bank
Many people in Russia are worried about the currency crisis that broke out in December 2014. The reasons for it are well-known geopolitical events, after which sanctions were imposed against Russia, which provoked a sharp fall in the ruble. In mid-December, the Bank of Russia significantly increased the key rate from 10.5% to 17% per annum. During the previous two years it was 7-8%.
All the inhabitants of our country have heard about this, but not many people guess the reasons for such an increase in the key rate by the Central Bank. Those Russian citizens who keep their money in a bank have noticed that banks have begun to offer high rates on deposits up to 20% per annum.But how these two events are connected, and also what is the difference between the key rate and another basic concept - the refinancing rate, few people know.
Impact of the key rate
The key rate is the rate of the Central Bank, which it sets for commercial banks, issuing them short-term loans for a period of 1 week. At the same rate, the Bank of Russia accepts deposits from banks in the national currency. This is one of the influential tools of the Central Bank to influence the financial and credit system of the country, introduced in 2013.
The size of the key rate affects the amount that commercial banks will be required to pay for the money received for a short period. Due to a significant increase in the key rate, banks lost the opportunity to buy foreign currency from the population with money taken from the Central Bank, so the ruble exchange rate stopped falling so sharply, and foreign currencies, respectively, grow.
But loans, especially short-term ones, began to rise in price, which will have a very negative impact on the financial condition of both borrowing organizations and lending banks.
The role of the refinancing rate
The refinancing rate is the most important rate of the Central Bank, the main financial instrument associated with legislative acts and introduced in 1992.
The main difference between the refinancing rate and the key one is the application of the refinancing rate for long-term loans. Under this rate, the Central Bank lends to commercial banks at an annual percentage rate.
Below this rate, commercial banks will not issue loans, because the excess of interest on loans issued by the bank and the refinancing interest rate is its profit.
The key rate affects the short-term obligations of banks to the Central Bank, and the refinancing rate affects the long-term ones. In addition to the economic function, the refinancing rate also plays a fiscal role in the economy:
- It is used in the calculation of fines and penalties in case of non-payment of tax or salary delay.
- The taxation of deposits is tied to it: if interest on ruble deposits exceeds the refinancing rate by 10 points (8.25 + 10%), this interest is considered income and is subject to personal income tax at a rate of 35%.
Recently, due to the developing global financial crisis, more and more people are becoming interested in the economy, its indicators, terms and concepts. In this regard, many questions arise, among which one of the leading places is the difference between the refinancing rate and the key rate. First, let's decipher these concepts.
key rate- This is an indicator that determines the percentage of the Central Bank on short-term weekly loans provided to banks. Also, this value is decisive for the deposits that the Central Bank accepts from banking institutions. This indicator is the main regulator of inflation and investment attractiveness.
Refinancing rate is the annual interest rate on loans borrowed by credit institutions from the Central Bank of Russia. Today, the role of this financial and economic indicator is secondary; it is used to calculate fines and penalties.
Impact of changes in the lending rate of the Central Bank of Russia
Until 2013, there was no such thing as a discount key rate in the Russian economy. Instead, the key role was played by the refinancing rate, which was first introduced in 1992.
On September 13, 2013, in order to control inflation and increase investment attractiveness, the Central Bank simultaneously introduces a key rate and determines its size at 5.5%. Until December 2014, statistics recorded an increase in this indicator, after which a gradual decrease began, and at the moment its size is 11%.
The impact of the key rate on the economy is as follows. It forms the amount of bank loans that are issued to individuals and legal entities. In addition, inflation is adjusted with its help, and the volume of resources attracted by commercial banks is determined.
To reduce inflation, the Central Bank uses an increase in the key rate. The mechanism of influence can be understood as follows.
The consequence of the increase is a change towards an increase in the rate on deposits and loans, including mortgages, which are provided by banks. Naturally, purchasing power is falling, ruble pressure is decreasing, and inflation is slowing down.
This is one of the options for applying an increased key rate. Another could be observed at the end of 2014. Then the Central Bank decided to raise its value by 70% from 10.5 to 17%. This move significantly limited access to short-term lending for commercial banks. The result of this was a decrease in the number and volume of speculation in the foreign exchange market, as well as inflation, due to the lack of borrowed ruble stock.
If the country's economy is in a state of stagnation, production and business activity are reduced and because of this, deflation begins, a decision is made to reduce the rate. This reduces the cost of a bank loan, which, in turn, stimulates lending to the real sector of the economy.
Differences between the refinancing rate and the key rate
What is the role of the refinancing rate?
To date, its practical role is as follows:
1. Determines the need for taxation on deposits in rubles and foreign currency, if their interest rate exceeds the refinancing rate by 5% (in the case of deposits in foreign currency - by 9%)
2. Calculation of the daily penalty charged for late payment of tax fees. It is calculated as 1/300 of the refinancing rate.
3. If the amount of accrued interest was not specified in the loan agreement, they are determined by the level of the refinancing rate on the day the agreement was concluded.
4. Calculation of the amount of penalties imposed on the employer for each day of delay in the payment of wages, vacation, sick leave and other accruals to employees. It is also equal to 1/300 of a part.
Until 2013, she played a key role in the conduct of monetary policy.
The year 1998 can serve as a historical example of her work. The Central Bank of Russia used the size of the refinancing rate to correct the financial sector of the Russian economy.
Starting from May and up to the crisis that engulfed the Russian economy in August, the refinancing rate was raised several times. In this way, the Central Bank stimulated the purchase of new government securities, demonstrating a high level of their profitability. However, the outbreak of the crisis showed the ineffectiveness of such actions, so it was decided to revise the monetary policy, soften it and lower the rate.
The difference between the level of the key rate and the refinancing rate of the Central Bank of Russia
Until the fall of 2014, when there was a significant jump in the size of the key rate, the values of both of these indicators did not differ significantly from each other. But the collapse of oil on world markets and the subsequent fall of the Russian currency forced to raise the discount rate, significantly increasing its gap with the refinancing rate, which today is 8.8%.
This resulted in a contradictory situation. The relatively low refinancing rate made it unprofitable for borrowers to fulfill their debt service obligations. The late payment penalty turned out to be significantly lower than the refinancing rate. That is, it has become more profitable for creditors to accumulate a penalty than to take a new loan to pay off current obligations.
An increase in the refinancing rate to the level of the key rate can correct this situation. This will increase the amount of interest charged to the level of interest on loans, which should encourage borrowers to pay rather than accumulate debt.
But this increase is planned only for 2016. Hence the current policy. Conducted by the Central Bank, leads to the conclusion that at the moment the problem of growing overdue debt is lower than the ability to control inflation in the country.