Lower House of the Russian Parliament, State Duma, intends to put a ban on issue of loans by banks and microlenders in case monthly repayments are over 50% of a borrower’s income, Izvestia daily reports.
According to Anatoly Aksakov, Chairman of the State Duma Committee on Financial Markets, the intended amendments are aimed at protecting borrowers. Russia’s Central Bank is also developing a mechanism to limit scope of lending in order to ease loan burden for individuals. The regulator believes that is essential to ensure qualitative expansion of the banks’ loan portfolios without causing excessive burden on the clients.
At the moment the share of banks’ and microlenders’ borrowers whose monthly repayments exceed 50% of their income is below 13%. The average national figure for monthly repayments is about 40% of incomes.
Anatoly Aksakov notes that a 50% limit is a common worldwide practice. Nevertheless, in most countries such restrictions are not set in respective laws and banks make their own assessments of the clients’ resources, and then decide on extending loans. Some countries have limits on mortgages (42% in Canada and 50% in Israel, for instance).
Experts fear though that legislative amendments will only make it harder for individuals to legally get loans thus making them use black market lenders’ services or abandon their plans due to unavailability of funds.