On June 19, 2024, the Federation Council approved a law aimed at reducing borrower risks by limiting variable interest rate loans to individuals and micro businesses. The law will take effect on September 1, 2024.
The legislation stipulates that only very large variable interest rate loans, including consumer and mortgage loans, may be provided to individuals. According to Rosstat, the minimum amount for these loans should be equal to the average monthly nominal wage multiplied by 1,000, currently about ₽74 million. The rationale is that borrowers of such large sums are financially literate enough to assess potential risks.
Variable interest rate loans in smaller amounts will be prohibited, with an exception for mortgage loans ranging from ₽15 million to ₽74 million for less than 20 years. 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 for a maximum of four years.
Similar restrictions will apply to micro-business loans regarding the maximum permitted increase in the interest rate and the repayment period. Micro-business borrowers will be allowed to send only one request to extend the loan repayment period if the interest rate increases. Unlike individual loans, there are no restrictions on loan amounts or collaterals for micro businesses.
The law provides some exemptions for this category of borrowers. The Russian Government may establish a list of industries exempt from these restrictions. However, these exemptions will not apply to loans received by micro businesses under government-subsidized programs supporting small and medium-sized enterprises.
Preview photo: BSG_1974 / Shutterstock / Fotodom
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