8/15/19
Natalia Leontyeva, a Siberian sales manager, bought a second hand car in 2013 with a loan worth about four monthly salaries. She now owes the equivalent of at least four years of earnings, one of a growing number of Russians struggling with debt. "You pay one month's installment, then the second. But then something happens again and it all piles up," she said by phone from the city of Novosibirsk in Siberia where she works at a steelworks. After five years of shrinking real incomes, many Russians are borrowing to make ends meet or even just to pay off their creditors - and the issue is climbing up the political agenda. "A third of those people taking loans already owe more than their annual income," Maxim Oreshkin, Russia's economy minister, told Reuters. "This is an issue of financial education, a debt trap, in some cases worse than gambling." For Russia as a whole, the burden of total household debt is relatively low, partly because only 5.5 million of its 147 million people have mortgages. But interest rates on personal loans are high and more than half of Russians surveyed by state pollster VTsIOM said they had debts. For a significant number, they are a major concern.
The central bank has tightened lending rules in recent years, and raised the amount of money banks need to set aside to cover loan losses. This has moderated the potential fallout for the financial system but borrowers are still exposed. In consumer lending, there is high indebtedness and ... it is growing at a rate far higher than the nominal increases in incomes. One high-ranking government financial official who asked not to be named due to the sensitivity of the issue said that when it came to those already spending large sums on debt servicing, "the point of no return has been passed already". "The most dreadful thing is not that banks or the central bank do not realise there is an issue, but that people with salaries of 30-40,000 roubles have to spend 20,000 on servicing their debt," the official said. The number of bankruptcies has grown from up to 20,000 in 2016, the year after a new private bankruptcy law came in, to almost 44,000 in 2018. It grew by around 29,000 in the first six months of this year, a 52% rise year-on-year, according to Russian official registry Fedresurs.
