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Consumer lending on the rise in Russia

125px-Flag_of_Russia.svgConsumer lending in Russia is on the rise, increasing by nearly 40 percent last year, as Russian consumers continue to seek out loans and credit cards.

“Now that there is economic stability, people have started to have more belief in the future and take out more credit,” Darya Baranovskaya, the manager of Home Credit’s Leninsky Prospect branch, said, according to Financial Times.

The growth, however, has remained a concern for Russia’s central bank, which met with the heads of the nation’s largest lenders to request that consumer lending growth not exceed 30 percent in 2013. The Russian central bank implemented measures intended to curb the growth, including increasing provisioning requirements this month for unsecured consumer loans and imposing sanctions against financial institutions that grow too quickly.

Russian banks have put pressure on the central bank to lower its lending rates from the current 5.5 percent, but the central bank has refused, saying that doing so would allow the nation’s banks to lend more freely. Bank executives said that while the central bank may have cause for concern, the issue has been exaggerated.

“There are a very small number of customers who are borrowing multiple loans from multiple banks,” Oliver Hughes, the president of Tinkoff Credit Systems, said, Financial Times reports. “If you take the wider picture there are no problems with the fundamental consumer lending market in Russia. Russian consumers are underleveraged, they are good payers.”

Herman Gref, the chairman of Sberbank, expressed similar sentiments regarding the issue.

“I am not concerned about any bubble,” Gref said, according to Financial Times. “If you compare the level of household debt in Russia with that of mature markets, the conclusion is that everything is under control.”

Russian household debt to GDP has remained at between 10 to 12 percent, compared to 20 percent for emerging markets like Turkey and 30 percent for the Czech Republic.  Fewer than one-fifth of all Russian consumers own a credit card, and most consumer credit carries high interest rates and short loan terms.

Ten years ago, Russian consumers began to take out loans to purchase items like appliances but are now using retail loans to pay for a wide variety of household and miscellaneous purchases, including education and healthcare. Russian retail lenders have largely obeyed orders from the nation’s central bank to reduce growth in 2013.

“No one wants to see what happened in the U.S. in 2008,” Ivan Svitek, the CEO of Home Credit, said, Financial Times reports. “Nobody wants to see 60 percent growth. It has to come down. What everybody wants to see—the central bank, the government—is more sustainable, stable growth.”

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