First about money, and then about money: in order to get a loan, you will have to legalize income
Unsecured consumer lending is growing fast in Russia, with debt up 2 percent in July, a record high in 12 months. Therefore, the Central Bank decided to establish in the fourth quarter more stringent restrictions on the issuance of loans to compatriots with a high debt burden. Those who spend 80 percent of their income on loan obligations should not account for more than 5 percent of a bank’s total loans.
As of August 1, the annual increase in unsecured loans was 13.3 percent, while the regulator found that 64 percent of borrowers spend more than half of their income on repaying loans, and a third of them spend more than 80 percent of their money on these purposes. This creates risks for borrowers and banks in case of possible shocks, the Bank of Russia is convinced.
According to the decision of the Central Bank, from the fourth quarter of this year, the volume of consumer loans to people with a high debt load should not exceed five percent of the total number of loans (now — 20 percent). For microfinance institutions, the macroprudential limit will be 15 percent instead of the current 30 percent.
The regulator also tightened the issuance of consumer loans with a debt burden of 50 to 80 percent. From October 1, banks and microfinance organizations will be able to issue such loans no more than 30 percent of the total. There are currently no limits. At the same time, the share of consumer loans issued for a period of more than five years will remain at the same level and will be limited to five percent.
The Central Bank expects that the measures taken will reduce the volume of loans issued in the fourth quarter by 22 percent.
The Central Bank website reports that the regulator will make a decision on macroprudential limits for the first quarter of 2024 in November 2023, taking into account the dynamics of the debt burden of the population.
There is nothing to do in MFI
The tightening of regulations in the field of unsecured loans will ultimately reduce the debt load of citizens, as well as reduce the risks of banks and MFOs, Anatoly Aksakov, head of the State Duma Committee on the financial market, is sure. “The decision is correct, as it is aimed at balancing the country’s financial system,” the deputy explained to Parliamentary Newspaper.
At the same time, the head of the committee ruled out possible relapses from the measures taken by the Central Bank in the form of the flow of clients who were denied loans from banks to MFIs.
The Central Bank keeps the situation under control, but if such risks arise, we will promptly join in solving the problem— Anatoly Aksakov promised.
He added that the State Duma is currently developing a bill that introduces interest limits on loans from microfinance organizations. The initiative is planned to be considered in the autumn session. The parliamentarian recalled that since July 1, the maximum possible interest rate on microcredits has already been reduced from 1 to 0.8 percent per day.
Also doubts the reorientation of consumer preferences towards MFIs after the decision of the Central Bank and financial analyst Mikhail Belyaev.
Of course, you can go to MFIs, but there will be completely different percentages. Thus, a person can fall into a credit trap., said the analyst. — In addition, the Bank of Russia does not just limit the issuance of loans, but to those who are extremely indebted. When the repayment of the previous loan accounts for more than 80 percent of income.
According to the expert, credit debt on the verge of its fulfillment naturally leads to delay, which calls into question the bank’s stability.
Therefore, the Central Bank, in my opinion, although through administrative measures, did the right thing. But I must say that the problem lies much deeper. Firstly, people do not always approach lending responsibly. Secondly, it should be borne in mind that there are professional debtors who take money from banks and do not think of returning it. And thirdly, the problem of shadow employment is highlighted. Because it is difficult to imagine that a person with a normal job and a normal income has a debt load of more than 80 percent. Then the question is, what does he live on? It is clear that he lives on some shadow income. And this also needs to be dealt with. Mikhail Belyaev said.
Earlier, Parlamentskaya Gazeta reported that Russians may soon be able to voluntarily refuse to conclude any loan agreements with banks and microfinance organizations. Such a bill on August 30 was supported by the commission of the Cabinet of Ministers on legislative activities. According to Anatoly Aksakov, the document may pass the first reading in September, and it may be finally approved before the end of the year.