Russia has experienced a 25% year-on-year increase in unsecured consumer loans in the first quarter of 2019, despite the central bank’s efforts to cool the market, Vedomosti reported citing data by Frank RG.
Unsecured loans accounted for around $16.2 billion of the total retail loans volume of $29.4 billion issued, and as a class are growing faster than overall retail loans (16%) and mortgages (3.5%).
In 2018 the Bank of Russia was concerned about the appearance of a consumer credit bubble and has tried to cool the overheated market.
“The people are tired of their ascetic lifestyle. Part of the population is drawing on consumer loans just to maintain a level of consumption,” Bank of Russia deputy head Dmitry Tulin told the State Duma, the country’s lower house of parliament.
The consumer loan growth is an “objective process that should not be outlawed,” Tulin said, while admitting that the regulator have not yet succeeded in substantially cooling the segment. According to the Bank of Russia’s, the average loan amount also increased in the first quarter. However, the increase could have been front-loaded as the risk coefficients on consumer loans have been increased since April 1.
Market participants surveyed by Vedomosti warned what both the maturities and amounts of the loans issued increased as the CBR tried to cap the interest rates through tougher regulation. As the loans are unsecured, the danger of defaults in this case increases.
