The Bank of Russia has announced the cancellation of the effective interest rate (EIR) limit for consumer loans, including microloans, from January 1 to March 31, 2025. This decision affects credit institutions, consumer credit cooperatives, agricultural consumer credit cooperatives, and pawnshops. It also applies to certain categories of consumer microloans offered by microfinance organizations.
The central bank is imposing a moratorium due to significant changes in market conditions impacting the EIR. The cost of funding for financial institutions has increased since the third quarter of 2024 because of a rise in the key rate and competition among banks for funds to meet liquidity coverage ratios. The average market EIR from the third quarter of 2024 serves as the calculation base for setting the maximum EIR level for the first quarter of 2025. Without this cancellation, there was concern that consumer loans could become less affordable and lead to potential manipulation in EIR calculations.
Despite these changes, existing macroprudential measures will continue to limit risks associated with borrowers' debt burdens. However, the EIR limit will remain applicable to high-risk short-term microloans issued by microfinance organizations.
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