Friday, April 19, 2024

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    The poorest will be driven into debt

    Tightening lending will reduce loan availability to a minimum

    It is becoming more and more difficult for an ordinary consumer to get a loan in Russia. On July 1, the Central Bank introduced new rules that tighten the issuance of loans to already indebted citizens. Thanks to the new requirements of the regulator, banks will be able to fix their financial statements regarding overdue obligations of clients, and borrowers will lose the additional temptation to go deeper into the enslaving pit of usurers. Meanwhile, the initiative being implemented runs the risk of inflicting the greatest harm on those whose interests it is, in theory, placed on guard: people who continue to collect loans, not because of the desire for a beautiful life, but for elementary maintenance of the income level that has fallen in the pandemic, will lose the opportunity to regularly interrupt until salaries.

    The tightening of the Bank of Russia’s credit policy concerns the increase of the risk ratio premiums on unsecured consumer loans. This ratio is calculated on the basis of reputation, credit history, assets in accounts and shares, income, and other circumstances related to the client, allowing to assess its solvency. The higher this indicator, the more reliable the borrower’s financial guarantees are considered. According to the Central Bank, the debt burden of citizens in the segment of unsecured consumer loans since the beginning of the year has grown from 11.7% to 11.9%, thereby updating the historical maximum. According to the regulator, the increase in premiums will limit the issuance of loans that are not encumbered with collateral, and credit institutions will be able to save up funds to “ensure resilience to potential stress situations” in the future.

    Recall that last year, against the background of a fall in unsecured consumer lending, a number of concessions were introduced aimed at stimulating the issuance of such loans: the premiums to the risk ratios for debtors who spend less than half of their income on servicing obligations were abolished. In addition, the Central Bank several times recommended that banks restructure loans to citizens, and small and medium-sized businesses, whose financial situation has deteriorated due to the pandemic, not to charge delinquency fines. Now the regulator is curtailing some of the measures taken during the pandemic to support the population and entrepreneurs.

    According to financial analyst, Ph.D. in Economics Mikhail Belyaev, the difficulty of issuing loans, especially unsecured ones, is a tough but adequate measure of the Bank of Russia in the current environment. “The simplification of lending to the population, which the government went to support citizens during the pandemic, partly led to the opposite effect. People began to collect debts for not always necessary purchases. Most expected to pay the lender out of social benefits or the salary that the employer promised to return after the quarantine. When hopes for the receipt of money fell, arrears to banks appeared. Now lending institutions will receive direct guidance on who to issue loans without collateral, and whose creditworthiness is in serious doubt. Borrowers, in turn,

    Meanwhile, according to Mikhail Polukhin, Director of the ACRA Financial Institutions Ratings Group, tighter regulation by the Central Bank may affect not only the most heavily credited borrowers but also reduce the availability of loans for the population as a whole, significantly increasing their cost.

    “Our compatriots will not be left without loans. Think of microfinance organizations, where the issuance of money is issued in a matter of minutes. The client, of course, will have to fork out, since the interest from small moneylenders can reach exorbitant amounts. But there is no need to worry about the financial solvency of large banks. The Central Bank plans to free up the capital of credit institutions in the amount of almost 125 billion rubles, which will support banks during the restructuring of problem loans. The money received by the financial institution will be directed to immediate needs – to pay interest or dividends on deposits, “- believes Mikhail Belyaev.

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