The Bank as a commercial institution can provide customers with a large number of financial services, but at the same time 2 main types of operations will be performed - cash and credit. What are the specifics of both? What can be traced the significance of both types of operations from the point of view of the development of a credit organization?
The specifics of cash transactions in banks
What are cash transactions of banks? These include the acceptance of cash and other valuables from customers of financial institutions, as well as the issuance of appropriate assets to them or to other citizens who apply. The bank’s cash desk is often regarded as one of the institution’s most liquid assets, but it is classified as low-income. The main purpose of the operations in question is the organization of the customer service system of a credit organization. Cash flow in this case is regulated by regulations issued mainly by the Central Bank, which has the status of a national issuing center.
Cash operations of Russian banks are among the most important economic activities of the respective institutions. By accepting funds from customers - individuals, legal entities, the organization increases available reserves, which can subsequently be used to carry out highly profitable activities, primarily related to the issuance of loans - private, corporate. The bank may receive additional income in cash circulation, for example, by charging a fee for the issuance of funds in certain cases (as a rule, this concerns the cashing of proceeds from the settlement and cash accounts of enterprises).
Bank cash operations are carried out according to the following principles:
- cash flow is carried out in accordance with the standards adopted by the Central Bank of the Russian Federation;
- cash is placed on internal accounts in a credit institution;
- The establishment of limits for balances is implemented in accordance with the adopted regulations.
There is a special subspecies of cash transactions - those that are carried out by the regulator, the Central Bank. It will be useful to study their specifics in more detail.
Bank of Russia cash operations
Thus, not only commercial banks carry out cash transactions, but also the credit regulator - the Central Bank of the Russian Federation. They are carried out as part of servicing private institutions on a contract basis. These operations allow you to:
- carry out optimization of cash turnover by a commercial credit institution;
- provide prompt settlements on client accounts owned by individuals or legal entities;
- make timely transfers of funds to banks according to limit requirements.
The solution to each of the tasks of the Central Bank of the Russian Federation implies that the regulator follows official legal norms or local regulations. Having considered what the cash transactions of a bank performing control and supervisory functions in the credit and financial market are, we will study the specifics of such procedures carried out by commercial institutions.
Cash Operations in Commercial Credit Organizations
Private banks carry out cash transactions that are aimed at servicing customers - individuals or legal entities. In this case, the norms issued by the regulator, the CBR, are applied. The main operations of banks that are carried out in the commercial segment of the financial sector are as follows:
- to receive cash;
- to issue cash.
The first group of operations assumes that a client or partner of an institution transfers cash:
- to the cash register;
- collectors, who subsequently transfer funds to the bank;
- to partner organizations, which then transfer cash to a credit institution by bank transfer.
The issuance of funds in most cases is carried out directly at the cash desk of a financial institution. If cash is required for a legal entity, then its receipt can be carried out on the basis of supporting documents that confirm the targeted spending of funds.
Cashier Functions
Banks performing cash transactions employ specialists who have competencies in this type of activity - cashiers. They are responsible for the correct calculation of the amounts to be received from customers, or, conversely, the issue, credit them to the account and certify the necessary documents. The cashier also provides reliable storage of funds - using, for example, a safe. The work of a specialist of the corresponding profile is also quite strictly regulated by law.
Cash Limitations
Russian legislation provides for a number of restrictions on the use of cash payments. So, cash cash transactions of banks on accounts owned by legal entities can be carried out only subject to legislatively established limits on the amount. In turn, these transactions within the accounts of individuals, as well as in settlements between citizens and organizations, can generally be carried out freely, without taking into account the amount of cash.
The use of CCP in cash transactions
The most important aspect of the operations under consideration is the use of CCPs, that is, cash registers. In most cases, this type of infrastructure is mandatory when accepting and issuing funds at banks. The CCP used by the financial institution must, firstly, be registered, and secondly, to ensure the correct calculation of transactions. It can be noted that CCP is also used in cases where a client pays for something with a plastic card - without cashing out money.
The considered operations of banks are carried out taking into account the norms forming cash discipline. We study their features in more detail.
Cash discipline in the calculations: what are its specifics?
The norms forming cash discipline can be:
- published by the regulator;
- developed by the bank taking into account the interests of investors, managers - provided that they do not contradict the provisions that are reflected in official sources.
These standards establish:
- general procedure for the bank to conduct cash transactions;
- rules for storage, transportation of cash.
The relevant standards are considered rather stringent. In financial institutions, operations (banks, both private and state-owned) are accounted for if there is the necessary infrastructure for conducting cash discipline. Its presence is one of the criteria for a regulator to issue a license to a financial institution. The bank does not have the right to work without an appropriate authorization document.
There are a large number of other criteria that determine the legality of ownership of a credit institution license. Among them - strict observance of cash discipline, as well as the provisions of the law governing cash transactions. Of great importance in this case, of course, are the economic indicators of the institution, but the quality of the bank’s capital management is largely determined by the degree of compliance with cash discipline. The qualifications of specialists working in the organization, the capabilities of its infrastructure, and the effectiveness of the management system are important here.
Cash desk is the main element of the infrastructure necessary for the bank to carry out the operations in question. It is usually represented in several varieties, which is determined by the scale of the financial institution, and the features of the services it provides. We study the specifics of the work of bank cash desks in more detail.
Features of the organization of cash desk work
The main settlement operations of banks related to cash turnover are carried out within the following main types of cash registers:
- incoming (they accept cash from customers or partners);
- expendable (cash is issued in them);
- bargaining chips;
- performing cash recounts.
The implementation of certain cash transactions is possible solely on the basis of internal supporting documents. They are executed by a bank employee, most often by a cashier. These documents can be additionally certified by a seal, other elements certifying the authenticity of the source used. Often, settlement operations of banks are implemented on the basis of a single window.
Most modern banks probably have their own ATMs, through which money is automatically issued to their customers. This procedure assumes that customers of a credit and financial institution have plastic cards issued by the bank.
It is possible for ATMs to issue money to one institution for citizens holding cards that are issued by another bank. In this case, the relevant institution may additionally earn by charging a commission for servicing clients of other organizations. But this procedure is possible only if a plastic card allows you to use one of those payment systems that is supported by a bank that provides an ATM with an acquiring function.
Along with ATMs, financial institutions also actively use payment terminals - in order, in turn, to receive cash from customers and credit them to their accounts. The next most important group of business operations of the bank is credit transactions. Consider their specifics in more detail.
The specifics of credit operations
Credit operations of banks, as it is easy to trace, based on their name, are associated with loans provided by the relevant institutions. They represent a legal relationship, fixed in special agreements with customers. As in the case of cash transactions, services can be provided to individuals or legal entities. This contract establishes how much the bank gives to the borrower and on what terms - in terms of interest and the term for repayment.
There are quite a few varieties of credit operations. They can be classified on the basis of their assignment to a particular segment. So, credit operations of banks can be associated with the markets:
- consumer loans;
- mortgages;
- corporate loans.
Each of the noted segments is characterized by a special approach of the bank to the formation of loan agreements. So, in the field of consumer loans, loans are issued to customers for a relatively short period, at rather high interest rates, but, as a rule, without collateral. In a mortgage, loans are usually long-term, issued at a lower interest rate and, in most cases, with a pledge in the form of acquired housing. Corporate loans - especially when it comes to lending to the largest enterprises, can be characterized by the desire of banks and borrowers to determine the individual terms of the contract, depending on the size of the business, its profitability, credit history.
Another criterion for the classification of credit operations is the loan format. They are:
- primary;
- submitted refinancing agreements.
Primary loan is a legal relationship in which a person or organization signs a contract with a bank for the first time or in order to use the money received to solve problems that are not related to paying off existing loans. In turn, refinancing is a credit operation, which is a legal relationship in the form of a loan agreement for the issuance of funds to a person to repay existing loans.
Commercial banks and banking operations, as in the case of cash procedures, are regulated by the norms of the Central Bank of the Russian Federation. Among the main instruments for influencing the market of the main financial institution of the state is the key rate. In many ways, it determines how commercial organizations implement credit policy. We study its features in more detail.
Key rate as the main regulation tool of the Central Bank of the Russian Federation
A lot of Bank of Russia operations can affect the credit market on a national scale, but economists consider the key rate setting to be the most important tool for the CBR to influence the financial system of the state. Its value determines what should be the credit interest paid by private financial institutions to the Bank of Russia for the use of borrowed equity funds. This indicator, in turn, directly affects the percentage that the commercial institution will set for loan agreements with its customers.
The lower the key rate of the Central Bank of the Russian Federation, the more active is the private credit market. A significant decrease in it, moreover, usually activates refinancing, as current credit holders get the opportunity to borrow again, but at lower interest rates.
A high key rate is usually set by the Central Bank in the event of a problem situation in the state economy. In turn, an improvement in indicators at the macroeconomic level may predetermine a decrease in the corresponding indicator. The consequence of this may be an increase in demand for loans from individuals or legal entities. In some states, the key rate is minimal or even negative. This is due to the desire of monetary authorities to increase, as much as possible, the capitalization of the economy.
If the credit market is slowing down at one time or another, then the bank's management can intensify the work related to the development of cash customer services. The solution to this problem can be facilitated by the fact that the common types of bank operations considered by us in many cases are interconnected. We will study this aspect in more detail.
The relationship of cash and credit operations of banks
Cash turnover and lending are the main operations of banks in terms of profit. The regularity of their implementation is predetermined by the fact that they are often held simultaneously. A simple example: the bank, having approved the loan application of the client, signs an agreement with him and asks to go to the cashier in order to receive cash. If a person draws up a credit card - perhaps having it in his hands, he will want to cash out cash at an ATM. Subsequently, the person will need to deposit cash into his credit account to repay the loan or for the same purpose on the card.
The fact that the bank uses the same infrastructure to serve clients with loans that is used in standard cash transactions can play a positive role in diversifying the business model of a financial organization. If the bank has difficulties with the promotion of credit products, then it will have opportunities for the development of activities related directly to cash services.
Summary
So, we examined what are the main monetary operations of banks - cash and credit. The first are sufficiently highly liquid, but not too profitable. Bank cash transactions bring in revenue, mainly due to the commission of a credit institution. Indirectly, they predetermine the appearance of profit due to the formation of reserves at the bank, which can be used in other areas of activity. Second operations, on the contrary, can significantly increase the capitalization of a financial institution. Having issued a loan, a bank usually expects to receive a sufficiently high profit, but there is a chance that the client will not be able to repay the loan due to financial difficulties.
Which bank operations have priority in terms of implementing a business model at a particular point in time is established by the management of a financial institution. In many respects, it depends on the value of the key rate of the Central Bank. The higher it is, the usually less intensive the credit market, and it makes sense for the bank to more actively develop areas related to cash services to customers.