Late Payments in Russia at 27-month High

Russian borrowers’ credit repayments for January 2013 were at the lowest level since October 2010, according to the quarterly
‘FICO Credit Health Index’
produced jointly by US analytics group FICO (formerly Fair Isaac) and Russia’s credit bureau the National Bureau of Credit Histories (NBKI).

The index fell 10 points to 109 on the scale in January; 2 points lower than in October 2012 and 6 points lower than in January 2012.

The index measures the overall credit health of the country, based on the percentage of consumer loans and credit cards reported to NBKI that are delinquent by more than 60 days. Since January 2012, this ‘bad rate’ has increased from around 7% to over 9%.

All regions of Russia showed a continued quarter-on-quarter drop in the index since January 2012, with the exception of Centralnyi, which remained constant compared to last quarter. The Dalnevostochnyi region suffered the largest fall since January 2012, of 13 points, while the Severo-Kavkazskii and Sibirskii regions fell by 10 points and Uralskii by 8 points.

“The decline in repayments is largely due to the large number of new borrowers who are not as experienced at managing payments,” said Alexander Vikulin, chief executive officer (CEO) of NBKI. “Over the last year, the number of consumers in the NBKI database grew by 28%, to more than 60 million.

“The fall in the index is not due to weak risk management on the part of Russian banks, which is generally at a very high level. If you look at the relationship between past-due consumer debt and potentially unrecoverable consumer debt, it has not changed since last quarter.”

“As the
‘FICO Credit Health Index’
continues to decline, we advise lenders to actively communicate with borrowers who are missing payments,” said Evgeni Shtemanetyan, who directs FICO’s operations in Russia. “The index has not fallen nearly as sharply as in 2008-09, but it’s clear that new borrowers need careful monitoring as well as credit education.”

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