Russia’s delinquent payday loan portfolio hits new record

The number of overdue payday loans in Russia hit a record 5.4 million in February, according to consumer credit rating agency Equifax.

In total, Russians owe microfinance organizations 172 billion rubles ($ 2.2 billion) – very short-term loans that usually come with high interest rates and are designed to tide borrowers out for a few weeks or more. month – agency Recount the public press agency RIA Novosti.

But more than a third of the total outstanding – 60 billion rubles ($ 790 million) – is currently held by borrowers who are more than 90 days behind on their repayment schedule. That figure rose 2.2% in February alone, bringing the volume of overdue payday loans, as well as the number of distressed borrowers, to an all-time high.

The Central Bank of Russia said last week that the average indebtedness of borrowers – the amount of their monthly income that goes to pay off debts – had increases during the pandemic due to declining income.

During years of declining and stagnating living standards, regulators have long monitored Russia’s payday loan portfolio and borrowers’ ability to repay, fearing this could be a source of wider economic instability. Rights groups have also been concerned following several reports during Russia’s latest economic crisis over the violent methods used by debt collectors to collect loans from heavily indebted borrowers.

Russia’s overall loan portfolio, including payday loans, both to individuals and businesses, rose 10% during the coronavirus pandemic, the rating agency Fitch calculated. About one in eight loans had to be restructured, although this was most often done by small businesses, with only 5% of personal loans needing review.

Nevertheless, the Central Bank is optimistic on the health of the country’s banking sector and did not sound the alarm on the growing indebtedness of companies or households. He believes a much smaller portion of loans should go wrong than previously thought, and the growth in the personal debt burden has also been lower than he feared at the start of the pandemic.