What is the refinancing rate?
Refinancing is a process in which the borrower must pay back a loan that already received a loan. At this rate, the federal bank lends money to commercial banks. Answering the question what the refinancing rate is, consider the following.
The value of the refinancing rate
The value of the rate is determined based on the current economic situation in the country and on the level of inflation. If the level increases, the Central Bank in turn increases the refinancing rate. In the case of reducing the rate of inflation, the bank naturally reduces the rate.
It happens like this: low refinancing rate - affordable loans. Interest is falling on the loan, and the number of people taking the loan increases. In this case, you overpay a little, and taking a loan will be profitable. The good news is that you can acquire a lot of necessary things and gradually pay for them.When people have a lot of money in their hands, they buy more and more, naturally, goods start to go up. The counters are empty, there are not enough goods for everyone and sellers raise prices on them. Along with this, inflation is growing.
Recall that inflation is a process in which money is depreciated. At different times for the same amount you can buy several pieces of the same product. If the level of inflation is large, it affects the financial condition of people. The higher the rate of inflation, the less the well-being of the people and therefore, discontent begins. In this case, the government will have to do something to prevent rebellions with another leader. The refinancing rate is a tool that affects the rate of inflation. In order to reduce inflation, raise the rate. Naturally loans will be more expensive.
Central Bank refinancing rate
What is the Central Bank refinancing rate will take a closer look. This is the interest rate that is used by the Central Bank of the Russian Federation when issuing loans to commercial banks in order to refinance. The rate is formed by the market for active operations, and apply it to relations with commercial banks.
With the help of the rate, the Central Bank influences the interest of deposits and loans.Therefore, commercial banks rely on the Central Bank of Russia in their interest rate policy. However, it is worth remembering that if the interest rate on deposits is greater than that of the Central Bank, the depositor will pay 35 percent of income tax, which exceeds the refinancing rate of the Central Bank. You will not waste your time on a visit to the tax inspectorate, since the amount is automatically withdrawn by the bank when you receive money in your hands. In this regard, it is nevertheless necessary to carefully consider the choice of the bank, the client of which you want to become.
Now you know all about the concept of the refinancing rate. At the same time, they learned to understand how inflation affects the increase in deposit growth.