Every eighth Russian turned out to be a persistent defaulter on loans

A financial bubble is inflating in the bank loan market

The bubble of “bad” debts has inflated in Russia to a frightening scale: the number of defaulters on bank loans in the first half of 2023 increased by 3.3 million, to 17.7 million people. In fact, we are talking about every eighth inhabitant of the country. Banks, as if nothing had happened, continue to provide loans to obviously financially incompetent people, who, as a result, become even poorer. At the same time, banks create risks for themselves, for customers, and for the economy as a whole. The state reacts to the situation sluggishly and sporadically.

The source of the alarming statistics is the Federal Bailiff Service (FSSP). 17.7 million – so many cases of debt collection from individuals in favor of credit institutions were being executed in this department in January-June 2023. Their number is growing from year to year. At the end of 2021, there were 12 million such borrowers, and 14.4 million in 2022. In total, it is planned to recover 2.5 trillion rubles from non-payers (a year earlier, the amount was left at 2.4 trillion), the FSSP said, noting that the forced repayment of bank loans the low solvency of citizens with debts on taxes and payments for housing and communal services, as well as their debt load, makes it difficult.

In general, the picture is gloomy. Inflation in the country is growing significantly, the ruble is ready to collapse at any moment, it is not clear what is happening to the real disposable incomes of the population. It seems that, according to Rosstat, in the second quarter they increased by 5.3%, but where did such an increase in the number of persistent non-payers come from in a short time? By the way, in the terminology of bailiffs, a “malicious defaulter” is not just a personal characteristic, but a legal concept, meaning that unpaid debts are collected from a person in court.

The figures from the FSPP are consistent with the recent initiative of the first deputy chairman of the State Duma Committee on Education, Yana Lantratova, who proposed introducing a credit amnesty for families with children in the country. In her address to Prime Minister Mishustin, the deputy recalled that the Russians owed banks more than 30 trillion rubles, while the overall level of debt load increased from 35% to 41% compared to the beginning of the year. Nothing is known about the further fate of the good undertaking. On the other hand, the Central Bank, which has always expressed concern about the high level of debt burden of citizens, recently made a rather controversial decision, in the opinion of experts, by canceling the limit on the total cost of a loan (TFR) on consumer and other types of loans until the end of 2023.

“There is concern about the inconsistency between the two trends: on the one hand, the number of defaulters on bank loans has noticeably increased, on the other hand, the dynamics of real disposable income has formally improved,” says Igor Nikolaev, chief researcher at the Institute of Economics of the Russian Academy of Sciences. – And what will happen if the dynamics of income goes sharply into the red? This may well be due to rising inflation and the fall of the ruble. In addition, the growing inability of borrowers to repay banks is a time bomb for the entire banking system, which needs to somehow compensate for the lack of liquidity.”

As world practice shows, such a situation is a rather dangerous, formidable indicator for the entire financial system of the country, says Alexei Vedev, director of the Center for Structural Research at the RANEPA. Take, for example, the US debt crisis of 2008, which began in this country in the high-risk mortgage market and quickly grew into a global one. For the past ten years, Russians have been reassured by the fact that we have a low share of “bad” debts in the total debt load. But this share is not constant; it increases along with the total debt burden. Today, interest payments alone amount to about 3 trillion rubles a year. Households find it increasingly difficult to pay them in conditions of increased uncertainty and turbulence – economic, financial, geopolitical. A serious risk is a sharp increase in mortgage lending. In order to raise funds for a down payment of 30% (considered safe), many in Russia are forced to take out consumer loans.

“Our Central Bank, with all its regulatory efforts, should act more decisively so that this debt lump does not grow in the country. – Vedev believes, – Raising the key rate alone is not enough, additional measures are needed, aimed, for example, at limiting banks’ profits.