The Central Bank lifted restrictions on the full cost of the loan: what awaits borrowers

Loan rates could double

Against the backdrop of an increase in the key rate to 12%, from August 16 to December 31, 2023, the Bank of Russia lifted the restriction on the full cost of a loan (FLC). This announcement was posted on the regulator’s website. According to the Central Bank of the Russian Federation, this will give its wards – credit institutions – “the ability to exercise greater flexibility in adjusting interest rates.” What this decision means for the market and how it will affect the pocket of borrowers, MK found out from experts.

According to the current legislation, interest rates on loans in banks, microfinance organizations (MFIs) and credit consumer cooperatives (CPC) for citizens cannot exceed the percentage level set by the regulator every quarter by more than a third.

At the same time, TIC in Russia is calculated with a delay of a quarter. So, in the third quarter of this year, restrictions should have been in place based on average market rates in the second quarter, and then the key rate of the Central Bank of the Russian Federation was still at the level of 7.5%. Last week, the regulator raised the key rate to 12% and made it clear that another increase is possible at the meeting in September. In order for the wards of the Bank of Russia, that is, all types of financial institutions, to conduct business profitably, the regulator gave them the opportunity to determine the TIC on their own. Moreover, restrictions have been lifted for banks for all categories of consumer loans, for MFIs – only for POS loans, as well as for consumer loans secured by mortgages. Restrictions for other retail loans remain. For them, TIC cannot exceed by a third the smallest of the two values ​​- 292% per annum or the average market value of TIC calculated for the current quarter for the corresponding category. In other words, we are talking about the fact that banks, CCPs and MFIs will be able to raise consumer loan rates above the established TIC limit, but not more than 0.8% per day, which is equivalent to 292% per annum.

As Sergei Ostrovsky, General Director of the Bely Ostrov Group, recalled, some time ago the Central Bank of the Russian Federation introduced an indicator of the total cost of the loan, because in addition to the rate for using the loan, certain commissions were added to the contract for borrowers, for example, for maintaining an account, servicing a loan, and so on. As a result, the total amount of interest that citizens paid to banks turned out to be quite large. After the PSK was introduced, it was prescribed in the loan agreement that, for example, the rate under the loan agreement is 16% and at the same time the PSK – that is, the amount of overpayment on the entire loan – is 38%. This information was reflected for the convenience of customers and in order to fully inform the borrower about the true amount of the overpayment. After it turned out that for most banks the TIC could be 1.5-2 times higher than the percentage indicated in the advertisement of various types of loans, the legislators decided to limit this parameter by tying it to the key rate of the Central Bank of the Russian Federation and giving it the opportunity to regulate, and if circumstances require, completely cancel. “Apparently, the Central Bank plans to raise the rate at the September meeting, and with this permission, it allows financial institutions to already now include these expectations in the cost of loans,” said Vladimir Chernov, an analyst at Freedom Finance Global.

Accordingly, the banks’ appetites are now limited not by three, but only by two parameters. The first of these is the requirement for a consumer loan rate, which cannot exceed 0.8% per day. The second is competition for borrowers between banks in the market.

Experts disagreed on the extent to which the desire to make money on the Russians from financial institutions will now be unbridled. Thus, according to Artem Tuzov, director of the corporate finance department at IC IVA Partners, the loan rate will double, which will be associated with a sharp increase in the key rate of the Central Bank of the Russian Federation and increased risks in the economy. “It can be assumed that the average rate will be about 17%, that is, 12% of the key rate and plus 5%,” believes Associate Professor of the Department of State and Municipal Finance of the Russian University of Economics. Plekhanov Mary Valishvili.

There will be a lot of banking competition for a borrower in the market in the next six months. But, according to Sergey Ostrovsky, financial organizations will attract borrowers by easier ways to get credit money: they will cancel some certificates, additional checks, for example, a call to work, will make it possible to receive money on the day of application. But everyone will try to earn money on interest: before the increase in the key rate of the Central Bank of the Russian Federation, it was possible to get a loan at 20% per annum (except for preferential ones), but today this is already unrealistic. According to the expert, now they will be issued at 26-29%, or even more than 30% – if we talk about the PSK.