Overdue debt of citizens to banks has reached 6 trillion rubles
20% of Russians with loans are unable to service them and are potential bankrupts. These are the data of the United Credit Bureau as of November of this year. There are nearly 10 million people in the country with overdue debts—debtors could easily populate the whole of Moscow. And the total debt of individuals whose payments are overdue for 90 days or more has exceeded 6 trillion rubles.
The trend of loan defaults is growing. A year earlier, there were 8.8 million people in the register of debtors, and their total debt was 5.68 trillion rubles. Now there are a million more potential bankrupts, and the arrears have increased by 300 billion rubles. If this is not a “snowball”, then what?
At the same time, around the same period, the Central Bank reported that in the first half of 2023 the number of borrowers in the country increased by 2 million people and the total number reached 47 million The situation is ascending.
The number of Russians who have acquired three or more loans has also increased. And worse, over 11 million.
Apparently, the “snowball” trend has also worried the Central Bank. It is no coincidence that a decision was made from January next year to tighten the limits on issuing consumer loans and credit cards to clients with debt burden indicators in the range of 50-80%. That is, by the end of this year, a person who must monthly pay the bank up to 80% of his income can still have time to take out a loan. Another thing is whether he will be able to pay it? From what kind of income?
But most likely, this is a problem of credit institutions. We can, of course, talk about the danger such debts pose for the Russian economy. However, if banks and microfinance organizations trust borrowers so easily, then perhaps they are pursuing some kind of benefit.
But what should Russians do if they objectively cannot service their debts? What is their perspective?
For comment, we turned to the financial ombudsman of the Association of Russian Banks, Doctor of Economic Sciences Pavel Medvedev.
“Let’s imagine for a moment that we began to measure the length of railways in Russia not in kilometers, but in kilograms,” he says. — This is absurd! But this is exactly how we measure the debt load of citizens. The central indicator is used — an arithmetic fraction. The numerator is the cost of servicing the debt, and the denominator is the citizen's income. If the value is less than 50%, then everything is fine with this client, he is a reliable borrower. And if more than 50%, it may be problematic. This is a completely absurd approach.
True, the Central Bank explains that such an indicator cannot be introduced in its current form; in the denominator, the cost of living must be subtracted from the citizen’s income. For the reason that you cannot take a penny from the PM to repay the debt, since the person will die of hunger.
Almost 60% of our fellow citizens have an income of less than two subsistence minimums per month. And if you subtract 50%, there will be less than one PM left.
— The situation has obviously gotten worse. I feel this from conversations with potential bankrupts; the level of tension in conversations is incomparably higher than it was, say, 10 years ago. Many people are simply in desperate straits.
The vast majority of our citizens need out-of-court bankruptcy. Because debt exposure affects the ability to buy food. Not a Mercedes, I emphasize, but bread. We argue that declaring bankruptcy for individuals is simplified to the extreme; for this it is only necessary to complete the enforcement proceedings. However, it is carried out by bailiffs by court decision. That is, in fact, the extrajudicial bankruptcy procedure must go through… the court!
— About a year before the coronavirus pandemic, I counted the number of debtors who had not paid for three or more months and most likely they won't pay anymore. There were more than 17 million of them then – today there are probably more. Of these, less than a million had a debt of more than 500 thousand rubles. The remaining 16 million had insignificant debt, and they are the ones who need out-of-court bankruptcy! But to do this they need to go through court. Four years ago, just to accompany a lawyer, if he is not a swindler, you had to pay 200 thousand rubles, now, probably, 300 thousand. Who will hire him to go bankrupt if the debt is, say, 100 thousand rubles? In my memory, perhaps thousands of citizens have gone through extrajudicial bankruptcy. This is a drop in the ocean of potential bankruptcies.