Banks are unwilling to ease credit conditions for their borrowers.
Banks are widely denying borrowers` requests for loan holidays and debt restructuring, despite a significant increase in such applications this year. The number of non-payers is growing by approximately 4 million people annually, with over 25 million debt-related cases currently being processed by court bailiffs.
In the second quarter of 2025, Russians sought credit holidays 2.2 times more frequently compared to the same period last year. Requests for mortgage holidays rose by 30%, and for loan restructuring by a significant 87%.
Despite this surge in demand, banks are slow to offer financial relief to their debtors, rejecting 80% of such requests. Only one in five borrowers facing financial hardship receives approval from their credit institution.
From the banks` perspective, this reluctance is understandable. A significant 36% of new borrowers already hold four or more loans, raising questions about the financial planning of these heavily indebted individuals. A Central Bank of Russia review indicates that by the end of Q2, 13.2 million borrowers across the country had three or more outstanding loans, a 20% increase from the previous year.
Experts rightly warn that multiple loans for a single client pose a significant risk. When loan repayments consume 50% or more of one`s monthly income, it signals a critical financial precipice. There`s a concern that accommodating such struggling borrowers might only encourage them to take on even more debt, leading to an unsustainable situation. This also raises a critical question for banks: do they not recognize the burden they place on individuals by approving additional loans to already heavily indebted clients?
«To be fair, banks have recently become more cautious in granting loans,» states Pavel Medvedev, Financial Ombudsman of the Association of Russian Banks. «They are wary of Central Bank sanctions. The regulator is gradually but steadily tightening its control, leading to certain losses for credit organizations. It`s understandable that the Central Bank is concerned about the high indebtedness of Russians.»
Key Interview Points with Pavel Medvedev
Why do banks refuse to restructure loans?
«Loan restructuring involves a set of measures that, in theory, improve a borrower`s situation by extending repayment periods. However, in practice, a longer term often means the individual ends up paying more to the bank over time. For instance, a loan originally set for 5 years might be extended to 10 years. Borrowers often don`t consider this long-term cost; they prioritize immediate relief. This is highly unfavorable for banks, especially now with falling key interest rates. Existing borrowers might have the opportunity to refinance their loans. If they took out a previous loan at, say, 30%, they could now refinance at 25%. Banks face profit losses because, by law, they are still obligated to pay high interest rates on deposits, and these terms cannot be unilaterally changed. Therefore, banks are reluctant to proceed with restructuring.»
Why are loan holidays denied?
«Under certain life circumstances, banks are legally obliged to offer clients a six-month `holiday` or grace period. The idea is that during this time, a person who is ill or has lost their job can recover financially and resume payments. I anticipate that the number of people losing their jobs in the country will soon increase, with large automotive plants already implementing reduced working hours or weeks as an indicator. However, cornering an individual in such a situation and demanding immediate payment will not yield positive results. Banks should actively seek ways for borrowers to repay their debts.»
What prospects await those who cannot repay their bank debts?
«The prospects are bleak. Typically, banks sue these individuals, and court bailiffs seize all possible assets.»
What exactly can be seized?
«There are certain limitations, thanks to the legislators. One cannot seize a person`s sole dwelling unless it`s under a mortgage. Restrictions also apply to tools or means of production essential for a person`s livelihood. For example, a beekeeper`s bees cannot be confiscated if honey production is their sole source of income. And there`s another crucial limitation, perhaps the most important: after all seizures, a person is guaranteed to retain a living wage. In Russia this year, this averages 17,733 rubles. This provision operates flawlessly. For many of the very poor people who seek my help, this legal norm is of immense importance.»
What is the percentage of over-indebtedness among Russians?
«Statistics on this matter are highly subjective. If loan repayments constitute 50% or less of a citizen`s income, it`s generally considered acceptable. However, if a person earns only at the subsistence level and half of that income goes towards loan payments, then, as one might assume, they face significant problems.»
