The share of retail consumer non-performing loans in Russia declined 0.6% to 4.8% as of October 1, according to Russia's central bank data.
Outstanding loans were 16.9 trillion rubles, up from 10.6 trillion five years ago, RBC reported.
According to the Central Bank, non-performing loans, or outstanding debt by individuals that is not being serviced for more than 90 days, stood at 811.8 billion rubles.
Total household debt in Russia has hit an all-time high and reached 10.6% as of October 1, 2019, according to the Central Bank. In the previous month, total household debt reached the record high of 2014 of 10.4%.
According to the regulator, the dynamics of household debt (the ratio of monthly debt payments to monthly income of borrowers) is largely due to the growth of unsecured consumer lending.
For example, household debt on unsecured loans in Russia also hit a new high as of October 2019 reaching 8.9%, which is the highest level since January 2015.
The Central Bank projects that debt load may decline in the fourth quarter of this year as growth rates of new loans' extension slow down and interest rates subside. The Central Bank maintains its consumer lending growth outlook for 2020 at 10%.
The regulator introduced surcharges on risk ratios depending on the level of debt load and full loan value starting October 1, 2019. The measure is aimed at mitigating risks related to household debt load.
The vice-rector of the Academy of Labour and Social Relations Alexander Safonov, speaking to Vestnik Kavkaza, noted that there are three main factors that influence the decline in non-performing loans. "The first is a refinancing policy, when banks transfer loans to each other at a lower rate. The second is the cancellation of bad debts. The third is the preventive restriction on granting loans to unsecured citizens," he said.
The refinancing policy also ensures an increase in the debt burden on Russians. "Due to regular reductions in credit costs due to the Central Bank’s policy to reduce the key rate, Russians are able to refinance by paying off debts at the expense of another debt - but their total debt burden is growing," Alexander Safonov stressed.
The professor at the department of the stock market and investments at the Higher School of Economics, Alexander Abramov, said the main factor is state policy. "The government and the Central Bank have seriously slowed down the growth of unsecured consumer lending, which, by the way, affected real incomes of the population. The last indicator of real incomes of the population has grown significantly due to this," he noted.
"There has been an excessive loan growth, and household incomes have been declining, respectively, the indicator of household debt burden has grown and will continue to grow - after all, there are no real big changes in incomes. Therefore, a fairer indicator of the population’s debt burden is the ratio of debt to income, in particular, the poor have a very high debt burden," Alexander Abramov stressed.
"At the same time, economic growth is not guaranteed, especially without improving the investment climate and changing the attitude of private entrepreneurs towards the stability of their business. And without solving this problem, citizens' incomes will not grow either," the professor at the department of the stock market and investments at the Higher School of Economics concluded
