Millions of citizens have to pay three or four bills at the same time
The situation with Russians’ debt to banks is aggravated by the fact that more than a quarter of borrowers out of a total of 42.5 million people are simultaneously paying on three or more loans. Moreover, no way out of this vicious circle is visible. On the contrary, the population continues to increase debts for all types of consumer lending, focusing on preferential mortgages, which, in conditions of growing inflation, increases the risks of the collapse of this market.
< span class="article__picture-author" itemprop="author">Photo: Alexey Merinov
As the Central Bank calculated based on statistics from the credit history bureau, the number of borrowers with three or more loans increased by 14.3%, to 11.2 million people. Over the course of the year, the number of such debtors increased by 2.2 million. About 21 million Russians consistently have only one bank loan. The regulator also records a significant increase in debt volumes specifically in the group of borrowers with multiple loans: today it accounts for 47% of all citizens’ obligations to banks versus 41% a year ago. The volume of creditors' claims to such clients reached 14.1 trillion rubles, having increased by 16.5% in just six months.
In addition, according to the Central Bank, in January-June the number of mortgage borrowers in the country exceeded 10 million, with 46% have, in addition to the mortgage, at least one unsecured (without collateral or guarantee) loan.
The problem is that the state cannot directly limit the number of loans issued to banks per borrower. At his disposal are only methods of indirect regulation. Thus, since 2019, credit institutions are required to calculate the client’s debt burden indicator (DLI) — it is calculated as the ratio of payments on all available loans to the person’s average monthly income. In turn, several regulatory restrictions of the Central Bank are tied to the personal income tax, such as macroprudential limits and premiums. Recently, a clear trend has emerged in the market: banks have become much less likely to approve cash loans to Russians. In the first half of October, the figure fell to 19%, that is, four out of every five applications are rejected.
And this is a double-edged sword: on the one hand, banks reduce risks for borrowers with high (over 50% of the total income) PDN, on the other hand, they are losing profits, and consumer demand in Russia is slowing down.
“The overall level of debt among the population is growing, this is obvious,” says Igor Nikolaev, chief researcher at the Institute of Economics of the Russian Academy of Sciences. — Yes, the Central Bank not only pays increased attention to this issue (it is especially saddened by the story with preferential mortgages), but takes very specific measures. However, it doesn't seem like anything is changing. It is extremely profitable for people to take out a preferential mortgage at a rate of 6% with the current Central Bank key rate of 15% and official inflation of 6.6%. Plus, in order to service interest on housing loans, Russians are actively taking out consumer loans at 20%. As a result, the debt spiral continues to unwind, which is fraught with problems both for borrowers and for banks, which, in particular, have to increase the required reserve ratios.”
The fight is against the symptoms of the disease, and not against the causes. The Central Bank is trying to influence banks, ensuring that they lend less to citizens with a high personal income tax. But it would be necessary (but this is no longer in the power of the regulator) to focus on fundamentally different tasks — macroeconomic ones: to achieve acceleration of GDP growth, increase the real incomes of citizens, stimulate people to long-term savings, Nikolaev argues.
“The debt crisis of 2008 in the United States began in the market of high-risk mortgage loans: Americans massively converted “short” mortgages to “long” ones, respectively, at a higher interest rate,” recalls Alexey Vedev, director of the Center for Structural Research at RANEPA. — Today in Russia the story is largely the same. It is increasingly difficult for households to make interest payments (about 3 trillion per year) in conditions of increased uncertainty — economic, financial, geopolitical. In general, people follow two strategies. As a rule, they take out new loans when there are not enough funds to cover old ones or when they underestimate their salary capabilities. In the second case, borrowers take a conscious risk: by constantly refinancing, they try to play on rising interest rates. As a result, despite the Central Bank’s tightening of monetary policy, a huge debt pile is formed in the country.”
And this can also be called a credit meat grinder, into which more and more of our fellow citizens are being sucked, grinding their destinies and wallets at the same time.