Microfinance organizations (MFIs) have limited the accrual of interest on microloans.
Limitation of interest on microloans
On January 1, 2017, Articles 12 and 12.1 of the Federal Law “On Microfinance Activities and Microfinance Organizations” dated 02.07.2010 N 151-FZ came into force, which introduce a ban on collecting from borrowers Microfinance organizations (MFIs) unreasonably high interest on consumer microloans. What is the reason for limiting interest on microloans?The reason is as simple as the world - Microfinance organizations (MFIs), striving to obtain excess profits, issue microloans instantly and practically without checking the client's solvency.
Microloan- This is a small loan that is provided for a short period of time, and as a rule, without confirmation and verification of the solvency of the borrower.
In article 2 of the Federal Law N 151-FZ of 07/02/2010, the concept of "microloan" is described as follows:
3) microloan - a loan provided by the lender to the borrower on the terms stipulated by the loan agreement, in an amount not exceeding the maximum amount of the borrower's obligations to the lender for the principal debt established by this Federal Law;
According to Federal Law No. 151 of July 2, 2010, the amount of a microloan issued to one borrower cannot exceed one million rubles. The actual issuance of microloans in the amount of up to 30 - 50 tr. is issued only with a passport and naturally without checking the solvency of the client.
Federal Law No. 151 of July 2, 2010 No. There are two types of restrictions on the accrual of interest by Microfinance Organizations (MFIs) on issued consumer microloans, namely:
- Threefold limitation of accrual of interest under a consumer microloan agreement.
- Termination of accrual of interest on overdue loans as soon as the interest reaches twice the amount of the outstanding part of the debt.
The Bank of Russia provides an explanation of the essence of the restrictions imposed by Federal Law No. 151, which boils down to the following:
1. From January 1, 2017, a three-fold restriction on the calculation of interest under a consumer microloan agreement entered into starting from this date comes into force.
If the repayment period under the agreement does not exceed one year, microfinance organizations (MFIs) are not entitled to charge interest to the borrower - an individual after their amount reaches three times the loan amount.
So, for example, with a loan of 5,000 rubles, the debt of the borrower at no time can exceed 20,000 rubles. This amount includes:
- loan amount of 5000 rubles
- accrued interest in the amount of 15,000 rubles (5,000 rubles x 3).
The Bank of Russia draws the attention of borrowers to the fact that the limitation on the amount of interest does not apply by law to penalties (fines, penalties), as well as payments for services provided to it for a separate fee.
This is how it is stated in the Federal Law of 02.07.2010 N 151-FZ (as amended on 03.07.2016) "On microfinance activities and microfinance organizations" (as amended and supplemented, entered into force on 01.01.2017) :
Article 12
1. A microfinance organization is not entitled to:
9) accrue to the borrower - an individual interest under a consumer loan agreement, the term of repayment of a consumer loan for which does not exceed one year, with the exception of a penalty (fine, penalty fee) and payments for services provided to the borrower for a separate fee, if the amount accrued for the interest agreement will reach three times the amount of the loan. The condition containing this prohibition must be indicated by the microfinance organization on the first page of the consumer loan agreement, the term of repayment of the consumer loan for which does not exceed one year, before the table containing the individual terms of the consumer loan agreement; (As amended by the Federal Law of July 3, 2016 N 230-FZ)
2. The second limitation concerns the delay in the repayment of a short-term (up to one year) consumer microloan: after the delay occurs, the MFI can charge the debtor interest only on the remaining (outstanding) part of the principal amount, however, the accrual will stop as soon as the interest reaches the double amount of this amount.
At the same time, the MFI will be able to start accruing interest again only after the borrower partially repays the loan and (or) pays the interest due.
The penalty (fines, penalties) should be charged only on the part of the principal amount not repaid by the borrower.
So, for example, if the outstanding part under the overdue contract is 5,000 rubles, the amount charged to the borrower will be equal to 15,000 rubles, which includes the amount of overdue debt - 5,000 rubles and accrued interest - 10,000 rubles (5,000 rubles x2).
Each MFI is required to place information about these restrictions on the first page of a short-term consumer loan agreement before a table with individual terms of the agreement.
The Federal Law of 02.07.2010 N 151-FZ "On Microfinance Activities and Microfinance Organizations" (as amended and supplemented) states this restriction as follows:
Article 12.1. Features of the calculation of interest and other payments in case of delay in fulfilling loan obligations (introduced by Federal Law No. 230-FZ of 03.07.2016)Sources:
1. After the occurrence of a delay in fulfilling the obligation of a borrower - an individual to repay the loan amount and (or) pay interest due, a microfinance organization under a consumer loan agreement, the term for repayment of a consumer loan for which does not exceed one year, has the right to continue accruing interest to the borrower - an individual only on part of the principal amount not repaid by him. Interest on the portion of the principal outstanding by the borrower continues to accrue until the total amount of interest payable is equal to twice the amount of the outstanding portion of the loan. A microfinance organization is not entitled to accrue interest for a period of time from the moment the total amount of interest payable is reached in an amount equal to twice the amount of the outstanding part of the loan, until the borrower partially repays the loan amount and (or) pays the interest due.2. After the occurrence of a delay in fulfilling the obligation of a borrower - an individual to repay the loan amount and (or) pay interest due, a microfinance organization under a consumer loan agreement, the term for repayment of a consumer loan for which does not exceed one year, has the right to charge a borrower - an individual a penalty (fines, fines) and other measures of liability only for the part of the principal amount not repaid by the borrower.
3. The conditions specified in parts 1 and 2 of this article must be indicated by the microfinance organization on the first page of the consumer loan agreement, the consumer loan repayment term for which does not exceed one year, before the table containing the individual terms of the consumer loan agreement.
- The message of the Bank of Russia dated 01.01.2017 - “The accrual of interest on short-term microloans is limited”
- Federal Law No. 151-FZ of 02.07.2010 “On Microfinance Activities and Microfinance Organizations” (as amended)
- Federal Law No. 230-FZ of July 3, 2016 “On the Protection of the Rights and Legitimate Interests of Individuals in the Process of Reimbursing Overdue Debts and on Amendments to the Federal Law “On Microfinance Activities and Microfinance Organizations””
Bank interest is nothing more than a payment for the use of borrowed funds. In civil circulation, the most famous cases of using interest are the fee for and the fee for the deposit. In both cases, there are two entities in the relationship, one of which is always a banking institution, which, based on certain methods of economic calculations, determines the amount of bank interest for a particular type of operation.
Types of bank interest
In the practice of banking, there are several types of interest:
- loan (credit),
- deposit,
- discount,
- accounting.
Loan interest - this is the amount that is charged to the borrower for the use of credit funds. Deposit interest is essentially the same as loan interest, but in this case the borrower is a banking institution that pays you a reward in the form of this same deposit interest for using your money.
Discount percentage implies the amount of discount from any amount in a cash transaction. The discount rate is the rate determined by the Central Bank at which this institution issues loans to other banks.
Calculation of bank interest
In financial practice, it is customary to calculate bank interest in annual terms. This means that if the bank indicates that the rate of funds accepted for deposit is, for example, 10% per annum, you will receive an amount greater by these 10% accrued during the year. If you need to calculate how much it will be received per month or per day - just divide the interest rate by the period of time you need. To find out how much you will receive per month, you need to divide 10% by 12 (the number of months in a year). And to calculate the interest per day, it will be necessary to divide the interest rate by 365 (the number of days in a year).
Simple and compound bank interest
Bank interest can be calculated in two ways, called simple and compound interest. In the first case, it is understood that the amount of the loan (deposit) is always taken as the basis for settlements during the term of the contract. Compound interest takes into account that in each subsequent period the amount on which interest is calculated increases by the amount of interest received in the previous period.
Traditionally, deposits on which the bank charges compound interest are considered to be more profitable. For loans, the situation is reversed. Profitable interest is calculated not on the entire amount of the loan, but on the balance of funds not returned to the bank.
Bank interest rate calculation
Before signing a loan agreement, it is desirable to understand what amounts will have to be paid, so the correct calculation of the bank interest rate is important. Many online banks offer a calculator for these calculations on their websites, but in fact it is not so easy to apply it, but it is possible to make an approximate calculation.
Many methods for calculating the bank interest rate are complex and require mathematical knowledge. Therefore, we will focus on simpler methods. If you add up all the payments proposed in the list, then you can calculate the approximate percentage that will have to be paid for borrowed funds:
- loan interest;
- all bank commissions (for consideration of an application, opening, servicing an account, and so on);
- all life insurance services and others;
For a correct calculation, one should take into account various circumstances that may arise at the time of using borrowed money, for example, early repayment, penalties, fines, and much more.
Some bank customers, on the contrary, trust a credit institution to store their finances. The bank pays interest for this, its size depends on many factors.
Interest rate in brokerage companies
The brokerage company is an intermediary between the seller and the buyer. If earlier only banks were engaged in savings operations, now similar services in other institutions are becoming more and more popular. The client's assets in a brokerage house can also be of a savings nature. The broker can use free funds on the client's deposit for his own purposes and pay the client for it.
Interest in brokerage companies changes frequently, so they are calculated daily and deposited at the end of the month. Brokers offer different interest rates. If the client concludes many transactions, then the option with a reduced interest rate will be convenient for him (Commission - 0.015%, SWAP - 1 pip, Interest rate - 3%). For strategic investors, a high percentage is important, since deals are rarely made (Commission - 0.03%, SWAP - 0 pip, Interest rate - 6%.). The client is obliged to make at least one transaction in order for the interest rate in brokerage companies to begin to be credited to the deposit.
When lending, there are several features of bank interest
The borrower pays an interest rate to a credit institution; today, when lending, there are several features of bank interest:
- loan (receiving profit by the bank from the client for the use of money);
- deposit (paid by the bank to the client for the opportunity to use his money);
- discount rate (the Central Bank rate at which loans are issued to other banks);
- discount (% for the risks associated with the issuance of a loan).
Each of them is designed for certain functions: savings, regulatory and redistributive. The calculation of the bank's interest rate is influenced by many different factors.
What determines the amount of bank interest
Currently, there is a single formula for calculating the interest rate on a deposit account. It is necessary to understand what the size of bank interest depends on and take into account that various factors can adjust it:
M \u003d D * (1 + r / 100 * t / 360).
M - the amount received by the client at the end of the investment period;
D - deposit amount;
r is the bank's interest rate;
t is the number of days for which the client entrusts his finances to the bank.
In the financial world, it is believed that each month has 30 days.
Example: put 100,000 rubles in a bank at 3% per annum for a period of 6 months.
100000 * (1 + 3%/100 * 180/360) = 100000 * (1+ 0,03 * 0,5) = 100000 * 1,015= 101500
The proposed formula is only suitable for, the interest on which is accrued once a year. If interest on a deposit is credited several times a year, for example, every month, then you will have to calculate interest using a complex banking formula:
M = D * (1 + r/100*30/360)^(360/30).
Types of banking risks
The types of risks of financial institutions are divided into general and banking, it is rather difficult to distinguish between them. In the process of functioning, the enterprise faces various problems. In specialized literature, types of banking risks are grouped according to financial transactions:
- banking risk (this includes risks associated with the activities of the bank and general, depending on external influences);
- credit risk (rises due to overdue debts of customers or enterprises lending to the bank);
- currency risk (associated with changes in the exchange rate);
- interest rate risk (fluctuations in interest rates force the bank to pay higher interest for using money or receive less income from loans granted);
There are risks in any enterprise, so it is important for the bank not to avoid them, but to anticipate and, as a result, reduce the threat to a minimum.
How to correctly prescribe in the employment contract the amount of the percentage allowance (for example, 10%) for work in areas equated to the districts of Kr. North.
Answer
In the employment contract, you can specify: "The percentage increase in wages for work experience in the regions of the Far North is paid in accordance with the law." This is explained by the fact that the amount of the allowance is regulated by law and cannot be changed by an employment contract.
You can also specify: "For the length of service in the regions of the Far North, a percentage bonus to wages in the amount of 10% is paid." At the same time, the amount of the percentage premium must correspond to the amount established by law. Also, when the size of the percentage premium changes, it will be necessary to conclude an additional agreement to the employment contract (see).
For details on this, see the materials in the rationale.
The rationale for this position is given below in the materials of "Systems Lawyer" .
« How to determine the size of the percentage allowance for work in the Far North
The amount of the percentage allowance for work in the Far North depends on:
- from the area in which the employee works;
- from the age of the employee;
- from the duration of his work (residence) in the region.
This follows from the provisions of Article 317 of the Labor Code of the Russian Federation, paragraph 16 of the Instruction approved by order of the Ministry of Labor of the RSFSR of November 22, 1990 No. 2, paragraph 6 of the Instruction approved by order of the Ministry of Labor of the RSFSR of November 22, 1990 No. 3, the order of the Government of the RSFSR of December 26 1991 No. 199-r.
For example, in the regions of the Far North, during the first six months of work, the allowance is not paid. In areas equated with the regions of the Far North, salary supplements begin to be paid after a year of work (clause 16 of the Instruction approved by order of the Ministry of Labor of the RSFSR dated November 22, 1990 No. 2). See the table for more details on interest rates.
Employees under the age of 30 are entitled to a higher allowance. However, in order to take advantage of the increased percentage allowance, they need to live in the corresponding region for at least one year (clause 16 of the Instruction approved by order of the Ministry of Labor of the RSFSR dated November 22, 1990 No. 2).
Special rules for the calculation of interest surcharges may be established in industry agreements. However, such agreements are obligatory for commercial organizations only if they join them (Article 48 of the Labor Code of the Russian Federation). For example, employees in the coal industry under the age of 30 are entitled to a preferential procedure for calculating the allowance. The right to an allowance, in contrast to the general procedure, they have from the first day of work. However, for this, such employees must live in the regions of the Far North (areas equivalent to them) for at least five years. This is stated in paragraph 3.2.9 of the Federal Industry Agreement on the Coal Industry for 2010-2012.
When charging a higher percentage surcharge, observe the general limit on its maximum size in this region. That is, in the regions of the Far North, it is impossible to charge an allowance in the amount of more than 100 or 80 percent of earnings. And in areas equated to the regions of the Far North - more than 50 percent (for more details, see table).
Such rules are provided for in paragraph 16 of the Instruction approved by order of the Ministry of Labor of the RSFSR of November 22, 1990 No. 2, and paragraph 6 of the Instruction approved by order of the Ministry of Labor of the RSFSR of November 22, 1990 No. 3.
Experience for the allowance
Does the allowance for work in the regions of the Far North depend on the length of service of the employee in this region
Percentage allowances depend not only on the region and age of the employee, but also on his length of service in this region (Article 317 of the Labor Code of the Russian Federation). The seniority that gives the right to receive allowances is determined in calendar days of work in the corresponding region on an accrual basis. Breaks in work and their duration, as well as the reasons for termination of employment relations, do not affect the procedure for calculating the length of service. This follows from the provisions of paragraph 1 of Decree of the Government of the Russian Federation of October 7, 1993 No. 1012 and the established judicial practice, the general approach of which is set out in the review of the Supreme Court of the Russian Federation of February 26, 2014.
Determine the length of service for receiving a percentage allowance according to the work book or certificates issued by organizations * (clause 33 of the Instruction approved by order of the Ministry of Labor of the RSFSR of November 22, 1990 No. 2, clause 28 of the Instruction approved by order of the Ministry of Labor of the RSFSR of November 22, 1990 . Number 3).
For shift workers working in the regions of the Far North and equivalent areas, the length of service includes:
- actual time (calendar days) of watch in the regions of the Far North and areas equated to them;
- actual days on the way (provided by the schedule of work on shift) from the place of collection (location of the organization - the organizer of the work) to the place of work and back.
Such rules are established in article 302 of the Labor Code of the Russian Federation.
How to calculate the allowance for work in the regions of the Far North
Calculate the allowance from the day the employee becomes entitled to it. For part-time workers working in the organization, accrue percentage bonuses for work experience in the regions of the Far North in the same way as for other employees (part 3 of article 285 of the Labor Code of the Russian Federation).
Charge the bonus on the actual earnings of the employee, including remuneration for the length of service and on the basis of the results of work for the year, provided for by the remuneration system. Do not charge extra*:
- on the district coefficient;
- for payments on average earnings, for example, vacation pay, payment for a business trip, etc.;
- for financial assistance;
- for payments that are of a one-time incentive nature and are not determined by the wage system (bonuses for anniversaries, holidays, etc.).
This approach is confirmed by paragraph 19 of the Instruction approved by order of the Ministry of Labor of the RSFSR of November 22, 1990 No. 2, paragraph 7 of the Instruction approved by order of the Ministry of Labor of the RSFSR of November 22, 1990 No. 3, paragraph 1 of the clarification approved by the decree of the Ministry of Labor of Russia of September 11, 1995 No. 49, and decisions of the Supreme Court dated December 1, 2015 No. AKPI15-1253 and July 17, 2000 No. GKPI00-315.
If bonuses are paid based on the results of work for any period, the amount of this bonus for the calculation of allowances is distributed over the months of the reporting period in proportion to the hours worked. Such a distribution is necessary for the correct calculation of the northern allowance on the amount of the premium. When calculating the allowance for the amount of the premium for the quarter, half year, etc., be guided by the following. Apply the amount of the allowance that is set for the month of the reporting period to which the amount of the bonus relates.
This procedure for calculating the allowance is established by paragraph 19 of the Instruction approved by order of the Ministry of Labor of the RSFSR dated November 22, 1990 No. 2, and paragraph 7 of the Instruction approved by order of the Ministry of Labor of the RSFSR dated November 22, 1990 No. 3.
The interest rate specified in the loan agreement is its essential condition. In most cases, a credit institution, after agreeing with the borrower, establishes the procedure for determining the loan rate, its size, including depending on the changing conditions stipulated in the agreement between the parties to the transaction. This moment is registered in clause 1 of article 819 of the Civil Code of the Russian Federation; part 1 of Art. 29, part 2 of Art. 30 of the Law of 02.12.1990 No. 395-1; Clause 4, Part 9, Art. 5 of the Law of December 21, 2013 No. 353-FZ.
In this article, we will understand what is the maximum amount of interest on the loan that the bank is allowed to set and MFIs. We draw attention to the fact that our material considers the issues of the marginal interest rate of consumer lending (targeted and non-targeted loans to individuals).
How is the interest rate on consumer loans regulated?
If we turn to Part 1 of Art. 9 of Law No. 353-FZ, then we learn that the interest rate under a loan agreement for consumer lending can be either fixed or variable. Different types of interest rates on loans are selected depending on loan products and lending conditions in various banks.
A credit institution, in most cases, under a loan agreement concluded with a borrower who is an individual, does not have the right to independently change the amount of interest on the loan or reduce the term of the agreement.
If we talk about consumer credit, then the bank unilaterally has the right only to reduce the interest rate on consumer credit on the basis of part 4 of article 29 of Law No. 395-1 and part 16 of article 5 of Law No. 353-FZ.
In a consumer loan agreement, which indicates the mandatory conclusion of an insurance agreement, a condition may be prescribed that the lender has the right to decide to increase the interest rate on the provided one.
This can happen if the consumer fails to fulfill his life insurance obligations (health, job loss, …) for more than 30 calendar days.
Thus, if, when receiving a loan for several years, the client insured life only for the first year, and then did not insure, then after a year the bank can raise the interest rate on an already issued consumer loan.
Please note that in the case when the borrower refused insurance and the bank went to increase the interest rate on an existing loan, this rate can only be increased to the level that was fixed at the time of signing the loan agreement in accordance with part 11 of article 7 Law No. 353-FZ.
At the legislative level in Russia, a limitation on the total cost of a loan (TCP) is fixed, which has a direct impact on the size of the interest rate in Russian banks.
By law, in a loan agreement, a bank cannot set interest on a consumer loan that exceeds the average market value of interest rates by more than one third. The average market value of interest rates is calculated by the Central Bank of Russia on a quarterly basis.
The Central Bank has the right to lift the restriction on interest rates on bank loans only if a fundamental change in market conditions occurs in the country (according to part 11 of article 6 of Law No. 353-FZ).
On a note! The Bank of Russia once a quarter calculates the average market value of TIC as a weighted average for at least 100 leading banks in the country, as for certain types of credit products, or at least for credit products of one third of the total number of credit institutions of the Russian Federation (according to Part 10 of Art. 6 of Law No. 353-FZ).
The Bank of Russia publishes the average market value of TIC once a quarter in the form of information and analytical materials on the official website of the Central Bank of the Russian Federation - "Information on the average market values of the full cost of a consumer loan (loan)".
What is the maximum interest rate on a microloan that an MFI can set?
Let's look at the features of interest rate limits on microloans issued not by a bank, but by a microfinance organization (MFO).
If a consumer loan agreement was concluded with an MFI for a short period (up to 12 months) starting from 01/01/2017, then the interest rate on it is limited to three times the loan amount.
The exception is payments to MFOs for additional services, as well as fines and penalties in case of delays (see 9 part 1 of article 12 of the Law of 02.07.2010 No. 151-FZ and part 7 of article 22 of the Law of 03.07.2016 No. 230-FZ).
If we talk about consumer loan agreements that MFIs entered into in the second quarter of 2017, then the average market value of TIC for an unsecured consumer microloan (with the exception of POS microloans), in the amount of up to 30,000 rubles and for a period of 30 days inclusive, amounted to 599.367%. Thus, the maximum PSC amounted to 799.156%.
Please note that if you took a microloan from an MFI under a short-term agreement after 01/01/2017, then in case of delay in repaying the microloan amount or paying interest on this loan, the microfinance organization has the right to charge you a penalty (fines, penalties), or other liability measures for the outstanding part of the principal debt under the loan agreement. In addition, the MFO may continue to accrue interest on the outstanding part of the principal amount until the total amount of interest reaches two times the amount of the outstanding part of the loan in accordance with Art. 12.1 of Law N 151-FZ.
In addition to the supply and demand for money and the actions of the central bank, there are a number of other factors that affect interest rates for specific instruments. These factors include:
- solvency of the borrower - the probability that the borrower will not be able to repay the principal amount of the loan and pay interest on it
- borrowing term – depending on economic prospects and supply and demand factors, the interest rate on a loan with one term may differ from the rate on a loan with another term
- the size of the principal amount of the loan - a large loan is more difficult to repay than a small one; however, a lender may offer an attractive rate of interest on a large loan as a result of economies of scale
Most loans require a certain security deposit to cover the risk of default by the borrower, ie the credit risk of the loan. Governments, and more specifically, central banks, are considered the most solvent borrowers in the country as they are the lenders of last resort.
Secondary Factors
1. Demand for money and its supply
The higher the demand for money, the higher the interest rate. High interest rates scare away borrowers and thereby reduce economic activity in the country. Low interest rates, on the other hand, encourage borrowers and boost economic activity.
2. Government action
The government can influence the size of the interest rate through the central bank. Reducing the amount of money in circulation in the country leads to an increase in the interest rate and, consequently, to a decrease in economic activity. An increase in the amount of money in circulation lowers the interest rate and increases economic activity.
3. Inflation
Lenders expect to receive compensation for the loan. Such compensation is the rate of interest charged for the use of funds. The interest rate must be higher than the inflation rate, otherwise the interest on the loan will not compensate for the loss in the value of money.
4. Deflation
Deflation is the opposite of inflation.
Consequences of changing interest rates
The consequences of changing the interest rate are different and affect the financial and real sectors of the economy.
Changes in the interest rate affect demand in the money market: when the interest rate rises, demand decreases, and when it decreases, it rises.
Since the supply of money does not automatically lead to a change in the rate, the market is disturbed in equilibrium: when the rate rises, there is an excess of money (threatens with inflation), and when the rate is lowered, there is a shortage of money (threatens with deflation).
Under these circumstances, there is a need for government control over the movement of interest rates. The level of interest is an object of state regulation, and the interest rate policy of the Central Bank of the country is an important instrument of monetary regulation. Therefore, the interest rate set by the Central Bank on the basis of studying the state of the money market is a barometer and benchmark for determining interest rates for all types of money market transactions.
