Taking out credit for the purchase of a car, television set or a cell phone has recently become routine in Russia. The consumer behaviour of an average Russian citizen is changing before our eyes. Several years ago people tried to save money for the purchase of a coveted thing, but now buying on credit is common practice. In the last seven years the value of purchases made on credit has grown 80-fold, from 27.6 billion rubles in 2000 (1.01 billion euros at the then exchange rate) to 2,233 billion rubles (64.3 billion euros) as of April 1, 2007. The value of overdue credit has reached 7.7% of Russias GDP. Many economists admit that in Russia growing consumption is the most effective booster for banking and the economy as a whole. For a long time, consumers demand for everyday goods was not satisfied at different times for different reasons. Sometimes, the required commodities were in short supply, and sometimes people did not have enough money to buy them. A sharp increase in incomes over the last few years has allowed Russian people not to worry about expenses for housing and food. The opportunity to get credit on sensible terms is yet another incentive for spending money on consumer goods. People in Russia are more and more willing to borrow money. The current desire to buy, even on borrowed money, prevails over the former passion to save. Bank deposits are increasing much slower than the amount of credit granted. In the last three years, the former have been going up at a rate of 30%-40% and the latter at 75%-100% a year. In 2000, the volume of bank deposits was 10.8 times greater than consumer credit, whereas today it is only twice as big. In a few months, they will even out.
As already mentioned, bad debts are growing, too, and much faster than credit. Swindlers are not wholly to blame for this situation. A lack of financial knowhow prevents some people from correctly assessing their purchasing capacity. As a result, in the last few years, the amount of bad debts has been steadily increasing by 50% a year. In the first three months of 2007, they went up by 23.1% to reach 66.1 billion rubles (1.9 billion euros), or 3% of all credits. These are the official estimates of the Russian Central Bank. Any credit that remains unpaid for more than three months is qualified as bad debt. But often banks deliberately undervalue such debts to make their balance sheets look better.
RIA Novosti / Mikhail Khmelev