Bank of Russia tightens restrictions on lending to borrowers with high DSTI ratios
The Bank of Russia has set macroprudential limits (MPLs) on unsecured loans and microloans for 2024 Q3. MPLs are to restrict lending to borrowers with high debt service-to-income (DSTI) ratios and the deliberate extension of loan (microloan) maturities. These measures will help restrict the over-indebtedness of households.
In making this decision, the Bank of Russia Board of Directors was guided by the following.
The borrowers who spend over 50% of their income to repay loans and microloans account for a significant part of outstanding unsecured consumer loans. After MPLs were introduced in 2023, this portion has been gradually declining, while still remaining elevated: borrowers with DSTI ratios of over 50% accounted for 56% of outstanding loans and microloans as of 1 April 2024 (vs 64% as of 1 January 2023).1 The loans of borrowers with higher DSTI ratios become overdue more often. Therefore, their share in the banks’ loan portfolio entails the risk of the bank’s possible losses.
Owing to MPLs and growth in households’ income (+14% YoY in 2024 Q1), banks and microfinance organisations (MFOs) reduced lending to borrowers with high (over 50%) DSTI ratios. The share of such loans issued by banks decreased from when MPLs were introduced from 63% in 2022 Q4 to 34% in 2024 Q1.2 However, as regards credit cards, a significant part of the funds (44%) is still provided to the borrowers with DSTI ratios of over 50%, since MPLs have a time-lagged effect on this segment. The share of loans issued by microfinance organisations to the borrowers with DSTI ratios of over 50% is comparable to that issued by banks (32%).
MPLs result in the redistribution of lending towards borrowers with lower DSTI ratios who are more resilient to stress. Growth in outstanding unsecured consumer loans (17.8% YoY as of 1 May 2024) is mainly determined by macroeconomic conditions, growth in households’ income and the monetary policy pursued.
The Bank of Russia believes it prudent to speed up the transition to a more balanced structure of the portfolio of unsecured consumer loans (microloans) and tightens MPLs on loans (microloans) issued to borrowers with high DSTI ratios for 2024 Q3. The tightening of MPLs will primarily concern loans (microloans) with a credit limit. Banks and MFOs will not be able to grant such loans (microloans) or increase limits on them if the DSTI ratio of a borrower exceeds 80%.
MPL values for banks (excluding banks with a basic licence):
| DSTI exceeds 50%, but is below 80% | DSTI exceeds 80% | Loan maturity exceeds five years | ||||
|---|---|---|---|---|---|---|
| 2024 Q2 | 2024 Q3 | 2024 Q2 | 2024 Q3 | 2024 Q2 | 2024 Q3 | |
| percentage of the amount of issued consumer loans without credit limits | 25% | 20% | 5% | 5% | 5% | 5% |
| percentage of the established (increased) credit limits | 10% | 10% | 5% | 0% | 5% | 0% |
MPL values for microfinance organisations:
| DSTI exceeds 50%, but is below 80% | DSTI exceeds 80% | Loan maturity exceeds five years | ||||
|---|---|---|---|---|---|---|
| 2024 Q2 | 2024 Q3 | 2024 Q2 | 2024 Q3 | 2024 Q2 | 2024 Q3 | |
| percentage of the amount of issued consumer microloans without credit limits | 25% | 20% | 15% | 10% | No limit | No limit |
| percentage of the established (increased) credit limits | 15% | 10% | 15% | 0% | No limit | No limit |
The transition to a more balanced structure of outstanding consumer loans and microloans will help decrease the risks of banks and MFOs and limit borrowers’ risks.
1 Borrowers with DSTI ratios of over 80% accounted for 26% of outstanding loans and microloans as of 1 April 2024 (vs 34% as of 1 January 2023).
2 The share of loans issued to borrowers with DSTI ratios of over 80% decreased from 36% in 2022 Q4 to 13% in 2024 Q1; to borrowers with DSTI ratios of 50%—80% — from 27% to 21%, respectively.
3 The MPLs set on credit cards reduce the proportion of new limits and limits increased by creditors rather than the proportion of issued loans with high DSTI ratios, as decisions to use the limit are made by borrowers. Outstanding amounts are in part related to credit cards issued during the period of easier MPLs or even before their introduction.
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