Experts explained why citizens need to be wary of excessive financial obligations
The average consumer loan in Russia in April this year amounted to almost 329 thousand rubles, which was a record. This is evidenced by data from the National Bureau of Credit Histories (NBKI). Over the year, the average consumer loan check grew by almost 100%. The company's analysts explained this by a sharp decline in indicators in March-April last year due to the shock reaction of the lending market to sanctions pressure and economic uncertainty. Experts spoke about the reasons and possible consequences for borrowers of the unexpected credit boom of MK.
“From the first quarter of 2023, for all banks with a universal license and microfinance organizations (MFIs), the Central Bank introduced direct restrictions on the volume of unsecured loans issued — first of all, to citizens with a high debt burden (that is, with a maximum debt burden above 80%). This has forced banks to adapt to the constraints by adjusting their business processes and product offerings. The result was an increase in the cost of consumer lending and tightening requirements for borrowers. The number of loans issued has decreased.
According to the NBCH, in the first quarter of 2023, the number of issued consumer loans (loans for the purchase of consumer goods) amounted to 2.9 million units. For comparison, before the New Year holidays, in the fourth quarter of 2022, 3.75 million units were issued.
Banks, in order not to reduce lending volumes and, as a result, profits, were interested in issuing larger loans. Therefore, loans were actively offered to potential borrowers with stable incomes and inflated amounts were approved.
A further increase in the debt load of citizens may create additional macroeconomic risks. The problems of Russians with servicing their debt will lead to a reduction in demand, and the losses of banks as a result of writing off “bad” loans will reduce their ability to lend to the economy.
“Increase in the average consumer loan in April is the result of several factors. In many ways, the “magic of statistics” plays a role here. The April figure of 328.5 thousand rubles is as much as 92% more than in April 2022.
But this is due to the fact that then, in the spring of last year, the demand for loans fell sharply due to sanctions and uncertainty in the economy. And if we compare it with that period as a base period, we get a very large increase. In statistics, this is called the «high base effect».
In addition, do not forget that over the year the prices of purchased goods have increased due to inflation. And to purchase them, you need more money, including credit.
But this is not the only thing, since in one month the average loan amount increased by 5%, from 315.1 thousand rubles in March 2023.
The increase in lending in recent months is largely due to differences in income and consumer behavior of Russians. In general, there is a recovery in consumer demand in early 2023 after a decline in 2022. This is fixed by the Central Bank. This is largely due to an increase in general government payments in the country and salaries. General incomes are rising, including due to large-scale payments to the military — contract soldiers, mobilized, support for their families. The reduction in the supply of labor due to the outflow of personnel from the economy contributes to an increase in the wages of the employed. This is one of the important reasons for the growth of lending.
On the other hand, when the export and other civilian industries contract, the incomes of the associated population groups decrease. And they are largely forced to attract consumer loans for the purchase of goods necessary for life, partially replacing them with a decrease in their income. In this case, there are risks of increasing unsecured credit burden. And this is fraught with an increase in non-payments, difficulties in servicing debts.”
“According to the NBKI, the average amount of consumer loans in April 2021 amounted to 304. the average bill grew by only 8%, which is lower than inflation over this period. So, in fact, we are talking only about the restoration of the consumer credit market after a powerful shock that hit the market last year. Let me remind you that the average bill in April 2022 decreased to 162.9 thousand rubles.”