Russian Borrowers Drowning: Cash Loans Skyrocket 45% as Savings Vanish

Russian households took out 487 billion rubles (roughly about $6 billion) in cash loans in a single month, a 45 percent increase from the same month a year earlier, according to data cited by the Mash Money channel and analyzed by economist and financial analyst Alexander Lezhava in a comment to Pravda.Ru. Over the first seven months of the current year, total cash lending reached 2.81 trillion rubles, and the average loan size rose to 216,000 rubles. Lezhava attributes the surge to households using credit to sustain accustomed spending levels while their own funds fall short. At the same time, banks continue to expand lending despite regulatory constraints because they are driven by profit motives. Many borrowers are rolling over existing obligations taken at lower rates into new, more expensive loans, a pattern that does not reduce the underlying debt burden. "People simply don't have money, and they try to solve their problems with loans. Banks need profit, so they are willing to lend despite some tightening. In the end, the banks' desire to earn and citizens' desire to somehow maintain their usual standard of living lead to rising indebtedness," Lezhava said.