Interbank credit is considered to be a borrowing area, which is distinguished by reliability. After all, any credit institution satisfies the temporary need for funds of another bank only in the case of stable financial stability. In addition, another individual or legal entity is too dependent on changes in external financial factors, especially inflationary fluctuations in the market.
Interbank lending is a common tool to support the activities of the entire banking system and its individual elements. Credit organizations resort to such loans in the event of a sharp decline in liquidity, in addition, they allow you to maintain the required level of profitability. Liquidity is understood as the ability of a bank to fulfill its obligations on time, without making customers wait. It is on this indicator that conclusions are drawn about the prestige of the institution.
However, interbank loans, in addition to undeniable advantages, have certain disadvantages. First of all, such is the fact that borrowing of funds is carried out only for a short-term period. Long-term lending by banks to banks would not be beneficial to either side. In addition, credit organizations resort to such an instrument to satisfy a temporary lack of financial resources quite rarely, only in the absence of other methods. And this is not surprising, because the cost of such a loan is quite high and is not always beneficial for the borrower. To eliminate the existing disadvantages and improve the banking system, it is necessary to develop such a direction as interbank credit. First of all, maximum efforts should be directed to create a complete information base and automatically receive all the necessary information.
Relations between the banks are displayed in the loan agreement, in particular, by agreement of the parties, a specific term, cost, method of repaying the loan, etc. is established. Recently, an interbank loan with an overnight term has begun to develop, that is, it will be necessary to repay the amount of debt after 24 hours. For a long time, its cost was quite low, so many organizations still use this service.
If we talk about the role of interbank credit (interbank credit), then its use for the development of the entire banking system is not in doubt. After all, it allows credit organizations to remain solvent even in times of financial difficulties. The conditions for issuing such a loan are affected by external economic factors. For example, the situation in the financial market determines the level of interest rates. Naturally, its decrease leads to a decrease in the cost of the loan itself, which means expansion of demand can be expected. Mostly, short-term loans are developed, since the issuance of a long-term interbank loan requires a combination of several factors. Firstly, the positive dynamics of the interest rate. Secondly, stable prices for government securities. And finally, the reliability of the borrowing organization, its sustainable solvency. In practice, such a “harmony” is extremely rare, which is why long-term loans are not widely spread.
It’s not a secret for anyone that in order to receive a loan of any kind, a borrower needs to provide a certain package of documents. An interbank loan is granted on the basis of an application, the constituent documents of the organization, the borrowing funds, a copy of state registration, the charter, the seal of the seal and signatures of the responsible persons and other standard documents. Prior to the final decision, the lender conducts a thorough analysis of the financial statements of the borrower in order to determine the prospects for development and the level of solvency.