Expert Board supports idea of loan repayment holidays for borrowers affected by emergencies
Borrowers affected by emergencies and natural disasters can be granted the right for a temporary reduction in or suspension of loan payments which will not worsen credit histories. The relevant draft law was discussed by the Expert Board for Financial Consumer Protection under the Bank of Russia. The draft was submitted to the Board by State Duma deputy Natalia Kostenko.
In summer 2021, many people in Sochi and Crimea lost their only housing and belongings due to the flood and were forced to use all their funds to purchase basic goods. As a result, they were unable to make scheduled loan payments. In July, the Bank of Russia recommended that creditors should restructure the victims’ debt, but banks and microfinance organisations were to make such a decision at their own discretion.
However, property insurance, including against emergencies and natural disasters, could have helped address the victims’ problems and would not have required any other support measures, as was stated by some members of the Expert Council.
The Bank of Russia will explore the proposals and opinions expressed and assess the reasonableness of possible loan repayment holidays, taking into account that borrowers should be responsible for the insurance of their property.
Currently, mortgage borrowers facing hardships have the right for a suspension of or decrease in payments. Moreover, a temporary mechanism for loan repayment holidays was introduced for mortgage and consumer loans in 2020 due to the pandemic. As shown by the results of the Bank of Russia’s monitoring, on average over 80% of the borrowers who were granted loan repayment holidays then resume their scheduled payments. 72% of the borrowers who reduced or suspended their payments according to the law on loan repayment holidays effective in 2020 also managed to resume their due payments.