Russians have accumulated “bad debts”: when the credit bubble bursts

“The upward trend will continue”

Consumers are in debt. At the end of 2022, the volume of overdue bank loans increased by 16%. This was reported by the collection agency “Debt Consultant”. The growth rate of debt is really impressive, since a year earlier Russians took loans in large volumes, but the loan delinquency was only 9%. Why did people stop paying, and how soon will the credit bubble burst?

Kirill Stus, specialist of the law firm “Intercession”:

“There can be many reasons for the decline in the solvency of citizens on credit obligations. Of course, the economic situation and the decline in income, as well as inflationary risks, are the most obvious and the first to come to mind.

Citizens can take out loans for a variety of purposes, whether it is starting a business, acquiring any property, or simply buying essential goods. As a rule, we are not talking about significant amounts, it all depends on the region, the financial condition of the borrower and his needs, as well as credit history.

Yes, the debt burden of citizens remains at a very high level, and the fact of an increase in the number of debts does not improve the current situation. This trend is negative. To what extent this can lead to the emergence of a credit bubble is difficult to say at the moment. We need to track the dynamics in the medium term, look at the indicators that will develop in 2023 in order to make more serious forecasts.”

Artem Deev Head of Analytical Department at AMarkets:

“The point here is that against the backdrop of increased inflation (almost 12% at the end of the year), people took out loans both for large purchases and for current needs (for information on the “family budget”). The increase in the cost of goods led to a decrease in real incomes of citizens, and this caused delays in unsecured consumer loans.

There has also been a significant increase in the volume of loans issued in microfinance organizations, where people often apply for small amounts even if banks refuse them. In the Russian banking system, there is a gradual tightening of requirements for borrowers, just in order to prevent the growth of “bad debts” (ie, non-recoverable amounts).

We are not talking about a bubble yet, the scale for this is not so serious. But the number of citizens declared bankrupt in the country doubled last year. This means that the upward trend will continue. After all, there are no obvious reasons for the growth of the well-being of citizens when they return debts to banks more actively.

However, there is also a positive moment: not all Russians are mired in debt. Statistics show that some borrowers began to apply to banks with a request for early repayment of the loan. People perceive a bank loan as an additional burden on the family budget and try to cover debts. In a period of economic uncertainty, this is a very correct position – it is better to live without debts, relying on available funds, and use loans only as a last resort.”