Russia enacts credit history law

[The Straight Story]

Russia enacts credit history law
18:23
Print version

Moscow (RIA Novosti economic commentator Nina Kulikova). A law on credit history came into force in Russia on June 1, 2005.

According to Sberbank (the Savings Bank of Russia), household deposits reached $68 billion last December, a 200% increase in three years, whereas retail lending had hit $20 billion by the end of 2004. Consumer lending was up 400% in the same three years, thereby forging ahead in the retail services market. The VISA International research company said consumer loans were mostly taken out in Russia to purchase household appliances (41%), computer equipment (37%), clothes (such as furs and sheepskin coats - 15%) and cars (6%).

More and more new players, primarily foreign banks, are emerging on the Russian market. Alexander Brinza, Sberbank's deputy chairman, said the share of foreign players on the retail lending market had jumped from 5.5% to 7.5%. The Russian retail financial market is also an attractive option for CIS and Baltic banks, and although it is difficult for them to compete with European and American giants, the potential of the market is so great that there is room for everyone.

In fact, experts estimate that 70% of Russians keep their savings at home, and only 2% use consumer lending services. The main reason is that the culture of living on credit has not yet struck root in Russia. Consumers know little about taking out a loan, and have just as little faith in banks.

Consumer lending interest rates are high in Russia, averaging from 15% on hard currency loans and from 20% on ruble loans a year. However, a survey conducted by the Business Vision agency showed that the interest rate was the decisive factor when it came to taking out a loan for only 19% of Russian borrowers. It was more important to 36% of those surveyed that loans were offered at the point of sale. A bank's prestige and whether or not it had affiliates mattered to 33% and 12% of respondents, respectively.

http://en.rian.ru/analysis/20050610/40506046.html