Loans are cut on takeoff – Kommersant

For the second time this year, the Bank of Russia is making an attempt to discourage lending to citizens with high debts to banks. The reasons are a steady increase in the volume of unsecured loans and an increase in the total debt of the population. By limiting one of the obvious inflationary risks in this way, the regulator simultaneously reduces the incentive for private consumption – which seems to be slowing down in May anyway and moving towards stabilization.

From the third quarter of 2023, the Bank of Russia will reduce by 5 percentage points (pp) macroprudential limits on unsecured loans and borrowings for highly leveraged borrowers. Consumer loans with a debt load of over 80% will be limited to a limit of 20% of disbursements against the current 25%. For microfinance organizations (MFIs) it will be 30% versus 35%. The share of consumer loans for more than five years is limited to 5% against today’s 10%. The goal is to limit the growth of the debt load of citizens, the Central Bank explained.

Tightening requirements for risky borrowers this year is the second time. In January, the regulator used the limit tool after the average number of loans from borrowers who received a new unsecured loan reached a maximum of the last three years, and the share of citizens with several loans increased by 5 points, to 27.8%. Now the Central Bank notes that banks and MFIs have already adapted to the limits introduced at that time. In particular, the market shifted in favor of banks with a historically small share of loans to borrowers with a leverage ratio (LBN) of more than 80% and a small share of loans for a period of more than five years, and compliance with the limits was achieved by banks issuing a smaller loan for a shorter period .

As a result, the growth of the portfolio of consumer loans and loans has not stabilized. In the first quarter it was 2.5%, in April – 1.2%. The number of loan applications submitted in the first quarter increased by 15% compared to the fourth quarter of 2022. It should be noted that in April, analysts at the DIP Central Bank reported that the growth of the portfolio of unsecured consumer loans in February accelerated to 0.9% from 0.7% in January, seasonally adjusted, but called it “moderate, below the average level of 2021” and concerns about this about not expressed.

However, later the Central Bank announced that in March the total debt of the population increased immediately by 545 billion rubles. (the probable reason is the easing of requirements of banks to borrowers), which became one of the maximum monthly volumes over the past few years, against the backdrop of shrinking deposits. This served not only as an additional source of acceleration in consumer demand, but also turned into a risk of accelerating inflation.

Meanwhile, the first signs of a slowdown in price growth in the services sector, which were responsible for the increase in inflation in April, are already evident (see Kommersant of May 18). Judging by the Sberindex data, private consumption in May also began to slow down and may even decrease compared to April. The Central Bank also notes that the upcoming tightening of limits will be partly offset by the expected change in the procedure for calculating PTI on long loans – for unsecured consumer loans, banks will be able to calculate the indicator for a period of more than four years without taking into account the assumption that such loans will be repaid within 48 months. This will reduce the share of loans with PTI over 80% by 2-3 percentage points, according to the Central Bank.

In August, the regulator intends to again make a decision on the value of the limits for the fourth quarter, based on the dynamics of lending, the debt burden of the population and lending standards.

Artem Chugunov