Bank of Russia Witnesses Lower Consumer Loan Interest Rates
OREANDA-NEWS. Financial mediators extending consumer loans in the Russian Federation have reduced interest rates in 2016 Q2. This is what market average and marginal effective annual percentage rates (EAPRs) data posted on the Bank of Russia website says.
Credit institutions which account for the greater part of loans have substantially lowered their consumer lending interest rates. Consequently, credit institutions’ average EAPRs have shrunk in almost every loan category both against 2016 Q1 and 2015 Q2. Thus, credit institutions’ average EAPRs in 2016 Q2 were within 16.2-33.0%, while in 2016 Q1 they were at 17.9-34.6%, and at 17.2-42.3% in 2015 Q2 depending on a loan type.
The cost of consumer loans extended to households by microfinance market participants has been lowering actually in every category. The trend towards EAPR reduction in individual categories of loans by microfinance organisations (MFOs) has been constant since 2015 H2.
Unsecured consumer loans from 30,000 to 100,000 rubles with a 2-6-month maturity term which are in high demand have experienced the most substantial EAPR shrinkage by 24% in 2016 Q2. Alongside other factors, this may be indicative of a higher purchasing power among borrowers which results in the reduction of loan defaults and delays – something MFOs need to consider when setting interest rates on offered loans.
POS-loan category to define consumer loans that are not given to borrowers but used straight to pay for goods and services to trade companies and service providers is introduced in published EAPR characteristics of microfinance organisations. The introduction of such category of loans in EAPR calculations adds to putting a limit on the cost of such loans for ultimate consumers.
‘Reduction of the maximum consumer loan cost creates conditions for higher affordability of these products. Market average values and marginal EAPRs calculated on their basis turn out to be more informative and disciplinary in the microfinance market’, says Ilya Kochetkov, head of the Bank of Russia Main Office of Microfinance Market and Financial Inclusion Methodology, when commenting on data published by the regulator.
Pursuant to Federal Law No. 353-FZ ‘On Consumer Loans’, dated 21 December 2013, the Bank of Russia calculates market average EAPRs by category of consumer loans on a quarterly basis. The EAPR is determined as a weighted average value of at least 100 biggest lenders by a consumer loan corresponding category or at least of one-third of the total number of lenders representing a consumer loan corresponding category. The calculation timespan is indicated in each calculation headline.