A decrease in the level of loan approval in Russia, which will follow the new requirements of the Bank of Russia, which came into force on October 1, could have a negative impact on both the market as a whole and the population. Economist Andrei Barkhota stated this in his material “You Can’t Refuse to Lend,” published in Moskovsky Komsomolets.
The financial expert states that 2/3 of the Russian population is in a region with a high debt burden, and a significant portion of newly granted consumer loans goes to paying off previously acquired debts and closing cash deficits.
“New bans and restrictions aggravate the situation of the most vulnerable segments of society and drive them into a hopeless situation, because we are talking not so much about the increase in the cost of new borrowings, but also about the decrease in the level of borrowing. The economist believes that there is an objective decline in the approval of consumer loans and their provision to the population.
Barhota believes the consequences of new restrictions could be quite dramatic and socially sensitive. It does not exclude that at least 70 percent of borrowers rejected by the bank will go to credit brokers and microfinance institutions to obtain financing on any terms.
In addition, in his opinion, the macroprudential innovations of the Bank of Russia will create conditions “for the rebirth of usury and pawn loans.”
“In the face of a hopeless situation, an increase in the volume of applications for recognition of individual bankruptcy is inevitable,” the expert adds.
Barhota emphasizes that in most cases the difficult financial situation is not caused by waste or irresponsibility, but by the rather low income of the population.
The expert believes that a fundamental change in perspective on the situation is required to solve critical problems.
“Isn’t it time to see citizens with high debt burdens not as those who violate the financial stability regime, but as citizens who find themselves in difficult living conditions? After all, restrictions on the issuance of new loans resemble a kind of financial euthanasia for borrowers with a high level of debt burden,” says the author of the material.
Let us also remind you that the Central Bank has tightened the conditions for debtors with high debt burdens as of October 1. In other words, it has become even more difficult for citizens who are in debt to get new loans.