Variable interest rate loans to individuals and micro businesses to be limited to protect borrowers
Only very large variable interest rate loans, including consumer and mortgage loans, may be provided to people. The relevant law aimed at reducing borrower risks has been approved by the Federation Council on 19 June 2024. The law will become effective on 1 September 2024.
The minimum amount of these loans should be equal to the average monthly nominal wage, according to Rosstat, multiplied by 1,000, which is currently about ₽74 million. Borrowers who take out such large loans are financially literate enough to assess potential risks.
It will be prohibited to provide variable interest rate loans in smaller amounts. The exception will be variable interest rate mortgage loans ranging from ₽15 million to ₽74 million for less than 20 years. In addition, the initial variable rate may be increased only by a third but no more than four percentage points. If the variable rate is raised, the loan repayment period may be extended at the borrower's request by no more than a quarter of the original term but maximum for four years.
Similar restrictions will be set on the maximum permitted increase in the interest rate on and the repayment period of loans to micro businesses. Micro-business borrowers will be allowed to send only one request to the lender for extending the loan repayment period if the interest rate goes up. Unlike loans to individuals, no restrictions have been put on the amounts of and collaterals for loans to micro businesses.
Nevertheless, the law provides for some exemptions for this category of borrowers. The Russian Government may establish a list of industries to which these restrictions will be inapplicable. In addition, these exemptions may not be granted for loans received by micro businesses under government subsidised programmes to support small and medium-sized businesses.