The mechanism for obtaining credit holidays will become permanently available to Russians

From March 2023, citizens will be able to take a break in payments on any type of consumer loans

Russians will be able to issue credit holidays for all types of bank loans from March 2023. This was announced by the head of the State Duma Committee on the financial market Anatoly Aksakov. The bill has already been considered by deputies in the first reading, and it is planned to finally adopt it in February. Immediately after this, the amendments will come into force and it will be possible for Russians to issue credit holidays for up to six months on any consumer loans if they prove a decrease in their income by 30% compared to the average monthly earnings for the past year. Experts told MK about whether the new law will help citizens cope with debts.

In order to receive a deferment in the payment of a loan under the new law, its size must be within the limit of 450 thousand – 1.6 million rubles. In addition to the requirement to reduce income by 30%, which will need to be proven to the bank, a Russian will be able to apply for such a benefit as a credit holiday only once during the term of the loan agreement. The maximum term for credit holidays will be six months.

It would seem that this is a reasonable decision, taking into account the objective difficulties that can occur in the life of any borrower (illness, job loss, etc.). But the bill also has drawbacks. “For borrowers, the disadvantages arise at the end of the holidays, when the amounts for servicing loans become higher than before them,” says Mark Goykhman, chief analyst at TeleTrade. “But this is the case when the lesser of two evils is chosen.”

The Central Bank of the Russian Federation made a proposal to make the credit holiday mechanism operational on a permanent basis and extend it to all consumer loans, highly appreciating the results of its targeted application during the pandemic. “In our opinion, credit holidays, both during the pandemic time and subsequent “turn-ons”, including for those mobilized and their families, fully proved the need for citizens in such an “emergency exit” in case of emergency,” says the ONF project manager “For the rights of borrowers” Evgeny Lazarev.

According to the regulator, more than 75% of those who used this tool in 2021 solved their financial problems during the grace period, returned to the previous payment schedule and faithfully fulfilled their obligations up to early repayment of loans. “Therefore, expanding this practice makes sense,” says Goykhman. “Moreover, it is becoming more and more relevant due to the economic situation in the country, the compression of people’s incomes.”

According to the Central Bank of the Russian Federation, as of December 1, 2022, overdue debt in banks amounted to 1.084 trillion rubles, which is 15% higher than at the beginning of the year. “This is almost twice as much as the amount of debt on bank loans has increased,” the expert notes. “The indicator is very unfavorable.” Moreover, relative dynamics are also important. The share of “delays” in the total portfolio of loans to people increased from 3.9% at the beginning of the year to 4.1% in December. Expanding the possibilities of credit holidays is an element of stabilizing the financial situation of citizens, preventing in many cases the deterioration of credit history, bankruptcies, and social consequences. On the other hand, it is a factor in stabilizing the banking system, reducing the risks of reducing its liquidity.

However, not everyone is inclined to see a lifeline for debtors in the new bill. The fact is that banks will make the decision to grant vacations, and, as practice shows, they are quite rarely ready to take the side of the borrower. So, according to the chairman of the board of the International Confederation of Consumer Societies (ConfOP) Dmitry Yanin, this initiative will not fundamentally change anything, and the credit holiday mechanism itself was ineffective before. Most borrowers who needed help during the pandemic were unable to access them. Some of the market participants were given vacations under their own programs of banks, which are distinguished by less favorable conditions. Among the reasons for the refusal was, for example, that only the reduction in the income of the borrower, and not the household as a whole, was taken into account, which is wrong. This norm will remain even with the indefinite operation of the credit holiday mechanism, which means that the number of refusals will not decrease. In addition, there is a rule on debt limits at which you can qualify for credit holidays, which cuts off borrowers with a smaller amount of debt from help. “I think that, as before, a larger number of debtors will have to use bank restructuring programs, which is less profitable for them,” the expert noted. He advised borrowers who are in a difficult financial situation, having difficulty repaying a loan for more than three months, to file for judicial bankruptcy. This will be more effective than taking vacations on banking programs, Yanin claims.