Wednesday, December 1 2021

New rules designed to deflate Russia’s consumer credit bubble went into effect today, forcing banks to take a closer look at risky borrowers.

Russian banks will now have to calculate each customer’s total “debt burden” – the amount of a person’s monthly income that goes to pay off loans and credit cards – before offering them a new loan. For loans to customers with higher leverage, banks will be required to hold more capital to account for the increased risk.

These steps are the latest moves by the Central Bank to cool Russia’s growing debt bubble, which has frightened policymakers. Among other measures introduced earlier this year, the Central Bank capped the maximum interest rate banks could charge borrowers at 1% per day in response to the boom in Russians taking out payday loans.

The Central Bank expects consumer credit growth to slow in the last quarter of 2019, from an annual rate of 22% in 2018 to around 10% this year, according to the RBK.

Banks, microfinance providers and credit unions are all covered by the rules, which affect new loans worth more than 10,000 rubles ($ 154). Analysts and representatives of major Russian banks told Forbes they expected the cost of borrowing to increase and the number of loan refusals to rise.

Nearly 5 million Russians spend more than half of their monthly income servicing loans, according to data from the National Bureau of Credit History.

Meanwhile, conditions for those taking out mortgages in Russia continue to improve due to lower central bank interest rates being passed on to customers. According to reports, mortgage providers Dom.RF and Sberbank have both cut some rates on mortgages to less than 9%.

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