Debt service-to-income ratio
The key change in regulation approaches is the implementation of the requirement for calculating a borrower’s debt service-to-income (DSTI) ratio. This requirement is applicable to credit institutions (except non-bank credit institutions entitled to transfer funds without opening bank accounts and conduct other related banking operations).
The requirement for DSTI calculation by credit institutions was established on 1 October 2019 by Bank of Russia Ordinance No.
Furthermore, the Bank of Russia stipulated the procedure for DSTI calculation by microfinance organisations in Bank of Russia Ordinance No.
DSTI calculation methodology
Creditors should calculate DSTI as the ratio of a borrower’s average monthly payments on all loans and microloans, including on a newly issued loan (microloan), to the borrower’s average monthly income according to the formula:
DSTI=average monthly payments to service debt on all loans (microloans)/average monthly income
Credit institutions shall calculate DSTI when making a decision on issuing an unsecured consumer loan (microloan), a mortgage loan, a loan for financing under an equity construction contract, or a car loan in the amount of 10,000 and more rubles or the equivalent amount in foreign currency, as well as when making the following decisions:
- on increasing the credit limit or extending the term of a loan (microloan) agreement — for loans (microloans) including those issued using a bank card; and
- on increasing the average monthly payment or changing the currency of a loan — for other loans (microloans).
However, there are cases when a credit institution is not required to calculate DSTI (including repeatedly):
- when a borrower requests a revision of a loan (microloan) agreement to suspend the fulfilment of the borrower’s obligations or reduce the amount of the borrower’s payments for a period specified by the borrower, in accordance with Article 61-1 of Federal Law No.
353-FZ,dated 21 December 2013, ‘On Consumer Loans’;
- for acquired credit claims if, after the date when these claims were acquired, the credit institution did not make any decisions on related loans (microloans) provided for by Paragraph 2 or 3 of Subclause 2.1.1 of Clause 2.1 of Bank of Russia Ordinance No.
Sources of information for calculating the average monthly payment (the numerator of DSTI)
Average monthly payments on loans (microloans) issued by other creditors are calculated based on the following:
- information available in the credit report provided by credit history bureaus;
- data on average monthly payments received from qualified credit history bureaus; and
- other documented information recognised by the credit institution as reliable and relevant, for instance, a loan (microloan) repayment schedule provided by the borrower and signed by the creditor, and/or a loan application signed by the borrower with the statement signed by the borrower to certify that the information in the application is correct, as well as other documents envisaged by the DSTI calculation methodology and recognised by the credit institution as reliable, relevant and proving the accuracy of the average monthly payment calculation or the absence of outstanding debt.
Average monthly payments on loans (microloans) issued by the credit institution calculating DSTI, or on the loan the application for which was accepted by the credit institution for consideration and/or the individual terms of which were communicated by the credit institution to the borrower are calculated based on the following:
- the schedule for loan (microloan) repayment; and
- the methods for calculating the average monthly payment for the period since the loan disbursement date or the DSTI calculation date until the date of the fulfilment of loan (microloan) obligations established by the agreement.
Sources of information for calculating the average monthly income (the denominator of DSTI)
When calculating a borrower’s average monthly income, a credit institution may rely on the following information to verify the borrower’s incomes:
- certifying documents, the list of which is established by the Bank of Russia; and
- other documents not specified by the Bank of Russia in the list of certifying documents.
Currently, the Indicative List of Certifying Documents approved by the Bank of Russia for calculating a borrower’s average monthly income includes the following:
- The calculation of personal income tax amounts accrued and deducted by the withholding agent (the
6-NDFL form)that was received by the credit institution in electronic form from the information system of the Federal Tax Service upon the borrower’s consent.
- The certificate of the individual’s incomes and tax amounts which is issued by the withholding agent to the borrower pursuant to Clause 3 of Article 230 of the Tax Code of the Russian Federation.
- The salary certificate issued by the borrower’s employer, if the employer is an individual registered as an individual entrepreneur.
- The certificate of the pension benefit, monthly lifetime benefits to justices, or monthly maintenance allowances to justices issued by a division of the Pension Fund of the Russian Federation or another government agency paying the pension to the borrower.
- A statement of the insured person’s individual account in the mandatory pension insurance system received by the credit institution in electronic form from the information system of the Pension Fund of the Russian Federation upon the borrower’s consent, as well as in paper or electronic form directly from the borrower.
- Information on individuals’ incomes and payments made by insurance contributors to the benefit of individuals received by the credit institution in electronic form from the information system of the Federal Tax Service upon the borrower’s consent.
- The certificate of a monthly payment, monthly compensation, or monthly additional financial support issued to the borrower by a government agency.
- A statement from the housekeeping book containing information on a private farm provided for by Clause 2 of Article 8 of Federal Law No.
112-FZ,dated 7 July 2003, ‘On Private Farming’.
- A personal income tax return (the
3-NDFL form)submitted by the borrower or received by the credit institution in electronic form from the information system of the Federal Tax Service upon the borrower’s consent.
- Statements of the borrower’s accounts for crediting the salary, pension and/or social benefits, real estate rental incomes (provided that the title to the real estate is certified), and/or other incomes accounted for by the credit institution when calculating the individual’s average monthly income that are issued to the individual by the credit institutions which opened the accounts to him/her in paper or electronic form (including those formed in online systems and/or mobile banking applications).
- Documents certifying incomes of borrowers registered as individual entrepreneurs, as well as attorneys, notaries, and other persons engaged in private practice:
- a unified agricultural tax return (for individual entrepreneurs — agricultural manufacturers);
- a return on tax paid under the Simplified Tax System (for individual entrepreneurs applying the Simplified Tax System);
- a certificate of registration (deregistration) of an individual as a professional income tax payer (KND (classifier of tax documents) 1122035);
- a statement of the status of payments (income) for professional income tax (KND 1122036);
- copies of receipts (payment orders) on tax payments for the tax periods corresponding to the period of the average monthly income calculation;
- a ledger of an individual entrepreneur’s incomes, expenses, and business transactions;
- a ledger of incomes and expenses of companies and individual entrepreneurs applying the Simplified Tax System;
- a ledger of incomes and expenses of individual entrepreneurs applying the Patent‑based Tax System; and
- a ledger of incomes and expenses of individual entrepreneurs applying the Tax System for Agricultural Manufacturers (unified agricultural tax).
- Credit reports.
- Other documents stipulated by a credit institution in the DSTI calculation methodology as certifying documents providing information on a borrower’s incomes, issued by state (municipal) authorities, agencies, organisations or companies (including documents issued by officials of the Armed Forces of the Russian Federation and military units), as well as individuals registered as individual entrepreneurs.
If a credit institution calculates a borrower’s average monthly income relying on data from credit reports provided by credit history bureaus, it should not use other information on the borrower’s incomes.
If a credit institution calculates a borrower’s average monthly income using one or more documents not specified in the list approved by the Bank of Russia, its calculation of the borrower’s average monthly income should include the smaller of the following values:
- income calculated based on documents not specified in the list approved by the Bank of Russia;
- average per capita income in the region where a borrower is registered at the place of his/her stay in the Russian Federation or at the place of his/her residence (if not registered at the place of stay) calculated for four quarters based on recent data on average per capita income published on Rosstat’s website.
Furthermore, through 30 June 2023, when issuing loans (microloans) not exceeding 50,000 rubles or car loans, a credit institution may calculate a borrower’s DSTI including the amount of income specified by the borrower in the loan (microloan) application signed by the borrower in paper form or filled in using online systems and/or mobile banking applications and adjusted by the credit institution using the methods (internal models) applied to assess borrowers’ creditworthiness for making a decision on issuing a loan.