Foreign banks race to invest in consumer-lending

Splurging shoppers are reaping the rewards of their efforts, with consumer lenders dropping rates and Western banks racing to enter a booming industry that was virtually nonexistent just a few years ago.

Austria's Raiffeisenbank on Monday became the first major foreign bank to offer unsecured consumer loans, affording clients up to $10,000 at 14 percent, an annual rate second only to state savings bank Sberbank. "We introduced unsecured lending in the fall and it tested rather well, so now is the right time," said Michel Perhirin, chairperson of the board of Raiffeisen, the leading foreign retail bank in the country. "We are striving to become a leader in our target audience, which is the upper-middle class."

The world's largest banking conglomerate Citibank, which only recently launched retail services in Russia, says it will soon move into consumer lending too. The bank is planning to launch consumer-lending operations in early February, the St. Petersburg Times reported.