Georgy Bovt Is Russia facing rebellions from desperate debtors? 13.11.2023, 08:12

There is more and more news about how the growth of Russians’ credit debt is accelerating. How serious is the situation?

The numbers themselves are scary, of course. Already in the middle of the year the total amount of debt to banks exceeded 30 trillion rubles, and now 33 trillion. Debt levels, the ratio of average debt to average annual income, increased in just nine months of this year 35% to 41%. According to some estimates, the average household loan exceeds half a million rubles.

Unfortunately, there are no detailed statistics on household income in Russia; the emphasis is on per capita income (benefits are often calculated in a similar way), which is strange against the background of endless conversations about the need to strengthen family ties.

Households are also not, as a rule, the object of tax advantages and preferences. However, based on the size of the average salary (although it is more objective to consider the median), we can conclude that the average household income is: slightly exceeds 100 thousand rubles per month.

It is important to note that the distribution of the debt burden is extremely uneven. Many people do not take out loans in principle (except for the interest-free payment period that is already customary with credit cards). The number of borrowers is now just under 50 million (just under half the adult population).

About 10 million of these are mortgage holders where the loans are at least secured by the property being purchased. The rest of the loans are consumer loans and, as a rule, are unsecured. Excluding mortgages and auto loans, they make up slightly less than half of total loans. Those who issue them have an average debt of around 900 thousand rubles, which is already approaching the annual household income.

Those who have tasted it are increasingly developing the habit of borrowing, including turning to microfinance institutions, which means falling into a debt trap. With inflation rising recently, some intuitively felt that they could beat inflation by buying something now and paying for it later.

I’m not sure if this is the right tactic when dealing with banks. Trying to beat the bankers is like trying to beat the dealer in the casino. Bankers are doing well right now: Profit of the banking sector for the eight months of 2023 reached 2.4 trillion rubles (As for all of 2021).

Meanwhile, the percentage of overdue debts reached 1.07 trillion rubles as of the middle of this year, which is slightly less than 4% of the total debt at that time. At the same time, 90% of overdue debts consisted of consumer loans. People pay their mortgage loans more or less regularly, but the situation with consumer loans cannot be considered completely dire.

For comparison: in the United States, where people are generally accustomed to “living on loans”, the share of debts handed over to bailiffs for collection is at a historically low level of 4.7% (10 years ago it was almost 15%). At the same time, the average debt amount for all loan types in America today is approximately 100 thousand dollars, and the average household income is 75 thousand dollars per year. On average, debt service does not exceed 9.6% of monthly income. Too comfortable.

However, in Russia, the situation does not look catastrophic if we look only at this parameter: at the beginning of this year, according to the Central Bank of the Russian Federation, the ratio of compulsory loan payments to total household income was 11.2%. Given the slight increase in household incomes, this share is unlikely to increase significantly.

However, there are other considerations that only consider debtors. In other words, the average loan payment level is approaching exactly half of the income. (In our country, a level of 40% is considered relatively safe; in prosperous America, this threshold is estimated to be 30%)For two-thirds of borrowers, payments amount to one-third of their income. So “on average” the picture looks calm, but when applied to the 8-10 million Russians who are most in debt, the situation is critical.

In Russia, the picture differs sharply from America in terms of the extremely unequal distribution of the debt burden. There is a large group of debtors whose situation is not comfortable at all.

Thus, while the number of people using three or more loans increased by 14 percent in the first six months of 2023, reaching 11.2 million, the increase in the number of such “critical” borrowers during the year was 25 percent. The share of the total number of borrowers with at least three loans is approximately the same. It is difficult for many to imagine the emotional state of such families.

In other words, they account for almost half of Russians’ liabilities to banks. The debt burden is extremely unevenly distributed among regions. Apparently cultural traditions also have an impact. Therefore, the biggest burden has traditionally been seen in the poor. tyva (115% of revenue) and Kalmykia (79%). But the residents with the least debt aren’t also the richest Ingushetia (15%), Chechnya (14%), Dagestan (13%).

In connection with the noticeable increase in the debt burden of Russians, populist speeches have already spread that the debts should be written off because they are exorbitant (amnesty is a good word). Such a freebie, of course, looks very attractive from the outside, but it immediately raises the question: “At whose expense is the banquet?” At the expense of the budget? Tough.

At the expense of banks — yes, but with the change that banks will include those costs in the upfront cost of loans for careful payers and other customers, just as they include defaults on past-due loans in rates for new loans.

I don’t think the state actually sees this situation as critical or explosive, is afraid of a serious “debtor revolt” and will heed populists’ calls to forgive everyone. Moreover, some “safety valves” remain.

For example, if the head of a household with a critical debt burden cannot find peaceful ways to sharply increase his income, he can conclude a contract with the Ministry of Defense, which will significantly improve the financial situation of the family. This trend has already become evident in relatively poor areas. The debt factor is actively used in social advertising incentive contracts. Based on the number of “problem” loans of 8-10 million borrowers, this “maximum mobilization potential” can be roughly estimated. As we see, it is far from exhausted.

Another option is to go to bankruptcy. Although this brings with it some personal problems. And so far it is not very popular. In the last months of this year, the number of individuals who went bankrupt increased by almost 30 percent compared to last year, reaching around 250 thousand. In total, more than a million people followed this path during the “special” bankruptcy procedure period (since autumn 2015). However, as a share of the total number of debtors, this is not very much. Most people who go bankrupt go to court. However, there is also a “simplified out-of-court procedure” through which you can easily contact the MFC. Here the increase was almost 70%, but in absolute numbers it was even less – about 8 thousand clicks. Three quarters of the requests lead to the start of the relevant process.

On November 3, a law came into force, in which the criteria for admitting citizens to out-of-court procedures were noticeably softened: the maximum amount of debts with which you can seek bankruptcy by erasing debts was increased from 500 thousand to 1 million rubles. To me, the lower threshold looks provocative – 25 thousand rubles. This may be an “easy way out” for those who have “no shares, no gardens” and still have nothing to take from them.

Of the 21.6 thousand cases filed so far, only slightly less than 16 thousand have followed this route (and this procedure has been in force since 2020). A few dozen or hundreds of people for different regions. Although the process is quite labor intensive from a bureaucratic point of view, it can be done if the situation is absolutely desperate. But thousands of people who have registered as bankruptcy candidates in the MFC have not yet been seen.

Therefore, the level of debt in Russia has not yet reached an explosion point that could turn into desperate uprisings. On the contrary, the existence of loans that have yet to be collected also works for the same social stability. The “Mortgage People” are not particularly prone to rebellions. This is actually how it works in many countries.

Borrowers are more likely to be social supports than those who overthrow power. Such a person tends to work two or three jobs, please his superiors (to avoid being fired), and often gets into new debts. Seeking shadow income etc. What about the new types of income that life and the authorities unexpectedly throw our way? Crisis occurs when there is no longer any opportunity to win and get paid.

The author expresses his personal opinion, which may not coincide with the position of the editors.

Source: Gazeta


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