Central Bank Tightens Fees on Unsecured Loans in Russia

Central Bank Applies Higher Fees on Unsecured Loans

The Central Bank has raised premiums tied to risk ratios for unsecured lending. This change increases the capital required by banks when issuing such loans. The higher the premium, the more capital banks must hold. Additional fees are intended to cushion potential losses from overdue loans and to build reserves for future needs.

Under the new rules, surcharges will apply to all loans with a total cost (TCP) of 25% or more. The total cost includes customer service costs, commissions, and insurance. The measure also targets borrowers with a debt load indicator (PDN) of 50 or higher, where more than half of a borrower’s income goes to debt payments. Previously, loans with a TIC of 35% or more and borrowers with a PTI above 80 were regulated. These changes impact the lending landscape for Russians seeking credit. [Citation: Central Bank]

The Central Bank estimates that the new measures will affect about 82% of credit card issuances and 66% of cash loans. At the same time, the average premium on new loans is set to rise from 0.21 to 0.89, though it remains below the early-year peak of 1.23. [Citation: Central Bank]

Why Does the Central Bank Impose Additional Fees?

Regulatory data indicate that in 2022 banks released 617 billion rubles of unsecured loan backlog, representing 5.8% of the portfolio excluding reserves. This action helped support the industry and enabled loan restructuring for borrowers affected by sanctions. By May 1, banks’ capital reserves reached 132 billion rubles and the loan portfolio stood at 12.4 trillion rubles. By June 1, the portfolio rose to 12.6 trillion rubles, while the number of borrowers with high debt burdens began to rise. The Central Bank noted that debt growth in July was the largest in 12 months, at about 2%, with an annual growth rate of 13.3% as of August 1, 2023. The regulator also noted that 64% of the loan portfolio is now held by borrowers using more than half of their income to repay debt, and 32% of the portfolio comprises loans to people with a debt load above 80%. [Citation: Central Bank]

As of May 1, 2023, total Russian loan debt exceeded 30 trillion rubles amid delayed demand. Data from the Federal Enforcement Service show that the number of non-payers in the first half of 2023 rose by 3.3 million to 17.7 million, with about one in eight Russians not meeting debt obligations. The Central Bank is aiming to cool unsecured lending and establish a framework that protects over-indebted borrowers. After the new measures take effect, the market is expected to adopt a more conservative stance. [Citation: Central Bank]

Anna Volkova, director of retail business development at Sinara Bank, explained that banks will need to rely more on official income verification when lending, reinforcing the rationale for tighter measures. [Citation: Sinara Bank]

Who Might Be Denied Loans?

Tatyana Belyanchikova, Associate Professor at the Russian University of Economics GV Plekhanova, emphasized that the tightening will significantly impact new borrowers. The measures now apply to any debtor with a debt load ratio of 50% or more, widening the gap between relatively secure and riskier borrowers. Banks are expected to refrain from lending to higher-risk clients more often. While some customers may view this negatively, analysts believe it will bolster overall banking sector stability. [Citation: Russian University of Economics]

Alexey Ashurkov, senior vice president at Renaissance Bank, acknowledged that lenders will increasingly reject borrowers with PTI above 50%. He noted that serious financing needs may still be met, but under stricter terms and through non-traditional credit channels. [Citation: Renaissance Bank]

What Will Be the Cost of Loans?

Yegor Lopatin, deputy director of financial institutions, stated that in the August–September period, rates on unsecured loans will rise mainly due to a substantial 350 basis point increase in the Central Bank’s key rate, pushing annual rates to around 12%. Some banks may have already raised rates; others might wait for the next policy meeting on September 15 to adjust their pricing. Volkova suggested that rates could climb by an additional 3–4 percentage points following the rate decision. [Citation: NKR Agency]

According to the Finuslugi credit index, as of August 24, the average rate for unsecured loans among Russia’s 20 largest retail banks exceeded 21%, while secured loans averaged 19.4%. Bank representatives indicated that the tightening of risk criteria could drive a more pronounced rise in rates for riskier loans, potentially by 5–7 percentage points as the marginal cost of lending is no longer a deterrent. [Citation: Finuslugi]

Outlook for the Credit Market

Ashurkov noted that banks with strong capital buffers may not alter lending policies significantly, but others will likely curb loan issuance. Consumer loan growth is expected to slow due to higher rates and tighter regulations. Analysts from Sovcombank and other institutions anticipate a return to more moderate levels of unsecured lending in the near term. Belyanchikova believes Russians will wait for the best possible terms, while lenders may require formal collateral for some loan series to justify registration costs. Vashchelyuk cautioned that the measures could affect new loan terms without necessarily increasing overdue debts. Some borrowers may delay payments due to rising prices and higher financing costs, even as demand shows signs of resilience. [Citation: Various]