Debt burden of borrowers has reached a historic high

The debt burden of Russians in the first half of 2021 increased from 9.8% to 10.24%, follows from the financial stability review, which was published by the Bank of Russia. This is a historical maximum for the entire time of the Central Bank’s observations. Another trend that the Bank of Russia drew attention to is the frequency of default by borrowers on long-term consumer loans, so the regulator will tighten the rules of the game for banks next year.

Debt load shows the share of obligatory payments on loans in the disposable income of citizens. As follows from the Central Bank’s review, the increase in this indicator was due to the accelerated growth of unsecured consumer and mortgage lending. At the same time, if the growth in mandatory payments of citizens on mortgages was balanced, then unsecured lending grew only due to the increase in debt per borrower, the regulator stated. As the Bank of Russia specified, this not only increases the risks of the portfolio of unsecured consumer loans, but also creates systemic risks.

According to the Bank of Russia, as of October 1, 2021, the debt of citizens on unsecured loans increased by 19.1% in annual terms. At the same time, 59.5% of such loans were issued to borrowers with a debt burden indicator (PDI) of more than 50%, that is, those who spend more than half of their income on debt servicing.

Another trend: the frequency of defaults by borrowers on long-term loans (more than four years) during the first year from the date of their provision is almost double the rate of defaults on loans with a maturity of less than five years. Therefore, from February 1, 2022, the Bank of Russia will tighten the conditions for calculating the personal income tax of borrowers for long-term consumer loans, follows from the review. This, according to the regulator, should cool the segment: it will be unprofitable for banks to issue such loans.


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