Living in Debt Becomes Possible in Russia

Russian banks start developing consumer crediting market

According to bank experts estimates, more than a half of Russian families constantly experience the lack of 15-20 thousand rubles ($500-600). What can they do if their relatives have the same problem and their friends feel very uncomfortable about lending some money? There is a way out. Bank Pervoye OBK has been practicing the loan "Prior to Wages" for four months already. The loan's maximum is $500, it can be registered during 15 minutes without any loan companies. Spokespeople for the bank say, such loans are not practiced anywhere in the world.

The new practice is just the beginning. In about 12 or 18 months, Russian people will have an opportunity to enjoy living in debt fully. The alliance of ROSBANK-Pervoye OBK banks is currently entering the market of consumer crediting. The new alliance intends to change both the situation on the market and the crediting terms fundamentally.

The banks started developing the joint program after Pervoye OBK bank became a part of the Interros holding. Russian major electrical stores have recently started using crediting systems for their customers too. Deputy chairman of ROSBANK's administration Vladimir Golubkov told PRAVDA.Ru that the stores use the standard 10-10-10 program. They give a loan for ten months, ten percent per annum and the first payment is ten percent of the total cost of a purchase. A customer does not have to make any extra payments. "These crediting terms are rather attractive. Our clients can raise such loans on more profitable conditions in our banks too," Vladislav Pershin, chairman of Pervoye OBK bank administration said. Vladislav Pershin added, the consumer crediting market appeared in Russia only about two years ago. Originally, the market was developed by rather small banks, like the Russian Standard bank or the Home Credit bank. Their interest rates reached 50 or 60 percent per annum. At present moment, there are more than five banks operating on the Russian consumer crediting market. The interest rate was reduced to 22-23.5 percent. Vladislav Pershin thinks it is not the lowest point.

ROSBANK - the leading bank in working with corporate clients - is entering the consumer crediting market with the help of its extensive branch network (more than 400 subsidiary offices nationwide) and exclusive technologies of Pervoye OBK bank. The union of financial reserves and crediting technologies allow to offer more attractive crediting terms, provoking activities for other market-members. "The competition and crediting terms will definitely change after this initiative," Mr. Pershin said.

Presently, ROSBANK works with Russia's largest trading networks. The express credit system is to start working in other networks too. Vladimir Golubkov said, the alliance was currently conducting negotiations with other partners." All these trading networks are clients of the acquiring firm UCS - Russia's leading acquiring firm," Mr. Golubkov said.

The new crediting system is very convenient for customers because registering a loan takes only ten or 15 minutes. Moreover, everything is registered in a store. The banks have a complex program for trading enterprises. In addition to customer crediting, the program includes all kinds of trading networks crediting, collection and trading risk insurance. Until recently, trading enterprises had to use services of two or three special banks. Deputy chairman of ROSBANK's administration Vladimir Golubkov said, ROSBANK and Pervoye OBK intend to increase the number of their Moscow offices up to 60 by the end of the current year. The number of offices in Russia as a whole is to reach 600. The scheduled consumer crediting portfolio is to make up $50 million by the end of this year.

"This is a rather pessimistic forecast of ours, because the market starts forming now - it did not even exist in Russia two years ago. That is why, we will not be surprised if the results surpass all our expectations by the end of the current year," Vladimir Golubkov said. The banker added, crediting electronic goods will not be actual in a year or two. Customers will soon use mortgage lending and cars crediting. Pervoye OBK administration's head Vladislav Pershin said, the banks' clients will become owners of special cards after they pay back the loan. The cards will simplify the further cooperation.