Debt Trends in Russia: Household Borrowing, Bank Policies, and the Path Forward

According to data from the Central Bank, the number of Russians holding three or more loans at the end of the first half of 2023 rose to 11.2 million. Preliminary figures suggested continued growth in the second half of the year, with final tallies expected in March, as reported by the Central Bank’s press service.

Officials noted that the rise in credit debt has outpaced income growth, increasing the overall debt burden on households. By December 1, 2023, the personal loan portfolio had expanded by 24 percent year over year, with mortgage lending showing especially strong expansion. 00the Bank indicated that mortgage lending was a key driver of overall credit growth.

As of December 1, 2023, mortgage growth stood at 35 percent on an annual basis, while consumer loan activity remained high at 16 percent year over year. In the same period, nominal income per capita grew more modestly, by about 11 percent in the third quarter of 2023 compared with the previous year.

Will Russians be able to repay their loans?

The Bank of Russia emphasized that both the number of loans per borrower and the debt burden themselves are crucial indicators.

It was noted that a large share of retail lending, roughly 63 percent as of October 1, 2023, is held by borrowers who dedicate more than half of their income to debt service. If incomes fall, these borrowers may encounter repayment difficulties. Nevertheless, the bank stressed that mortgage loan servicing quality remains high so far, supported by rising household incomes.

Andrei Loboda, an economist and communications director for BitRiver, observed that Russians have managed the debt burden up to now. He explained that the typical borrower allocates about 40–45 percent of income to consumer loan payments and 60–70 percent to mortgage payments.

Despite slower income growth, many Russians also earn income through work, self-employment, investments, or irregular sources. From this perspective, the risk of a broad debt bubble did not appear imminent, though the rising number of personal bankruptcies remains a concern.

Konstantin Kharchenko, associate professor at the Financial University under the Government of the Russian Federation, noted that the situation is not yet critical, but ongoing debt increases are undesirable from both economic and socio-psychological standpoints.

There is also a trend of taking out a consumer loan to cover a mortgage down payment.

The Central Bank monitors the share of consumer loans used for mortgage down payments and has indicated that this practice remains limited. The share has not exceeded 7 percent of mortgage lending, a figure that has risen modestly since 2019 and again since 2014.

Experts warned that if interest rates fall significantly in the future, the share of such loans could rise, potentially creating credit market risks.

Experts also pointed out that using a consumer loan to fund a mortgage down payment is not ideal, but in some cases may be the only viable option for households seeking to improve housing conditions. Reducing this practice would require developing a rental housing market, as well as other housing programs and cooperative approaches that do not rely on mortgage-backed down payments.

According to Kharchenko, relying on consumer loans for housing down payments contradicts the original intent of credit. It may be justifiable if rental opportunities arise from purchased housing, or if a borrower anticipates a higher income, though such scenarios are not common in practice.

What are the authorities doing?

The Central Bank aims to curb the growth of citizens’ debt burdens by tightening lending conditions for banks. In consumer lending, macroprudential limits are used to cap the share of unsecured loans in total lending, and there is ongoing supervision of risky lending practices.

The authorities reported that macroprudential limits helped reduce the share of consumer loans with a debt burden exceeding 80 percent of income, from 36 percent in late 2022 to 25 percent in the third quarter of 2023. Further tightening for late 2023 and early 2024 is expected to balance lending structures more effectively. The Central Bank’s press service noted.

Directly restricting mortgage lending remains outside the current toolkit, but the central bank has decided to raise macroprudential buffers for housing loans since October 1, 2023. From March 1, 2024, further increases in these premiums are anticipated for high debt burden housing loans, with a possibility of extending MPL applicability to mortgages beginning July 1, 2024.

A legislative proposal to empower the Bank of Russia to limit the share of loans secured for real estate has been submitted to the State Duma. The bill envisions extending macroprudential controls to both banks and microfinance institutions and would apply to a broad range of collateral, including buildings, structures, lands, and other secured properties.

Key author Anatoly Aksakov explained that since July 1, 2023, macroprudential limits have been adjusted to curb debt growth, yet the portion of borrowers with a debt burden over 80 percent remains significant. With this context, the draft law seeks a faster transition to a more balanced credit structure and tighter limits on unsecured lending for the fourth quarter of 2023. As of January 1, 2024, proposed limits would set 5 percent for banks and 15 percent for microfinance institutions for unsecured loans to high-debt borrowers.

According to Aksakov, mortgage-specific macroprudential limits are no longer fixed, though the market conditions warrant granting appropriate authorities to manage risk more effectively.

Officials concluded that imposing macroprudential limits on risky loans would curb their issuance while also easing capital requirements for banks. Lunging towards a calmer credit environment is seen as a balanced outcome.

Experts highlighted that higher interest rates may cool the overheated credit market, potentially reducing demand for new loans in early 2024. Looking ahead, it is possible that concessional loan programs could be phased out, making loan approval more closely tied to verified income levels. In the longer term, broader labor-market development and targeted government demand for a wider range of qualified workers could help ease debt pressure. Some economists see optimistic pathways in regional development, including Arctic areas, where higher wages and flexible repayment options might reduce the need for extensive borrowing.