Bank of Russia extends non-application of TCL restriction on consumer loans and certain types of microloans for 2024 Q1 (15.12.2023)

The Board of Directors of the Bank of Russia made a decision to extend the non-application of the limitation on the total cost of loan (TCL) for 2024 Q1:

• for credit institutions — for all types of consumer loans (microloans);
• for consumer credit cooperatives and agricultural consumer credit cooperatives — for all types of consumer microloans; and
• for microfinance organisations — for mortgage-backed consumer microloans and POS microloans.

However, the limits will still apply to the TCL for other types of loans issued by microfinance organisations and for all types of loans issued by pawnshops. The TCL shall not exceed the least of the following values by more than one-third: 292% per annum or the quarterly average market values of the TCL calculated by the Bank of Russia for respective types of consumer microloans.

This decision will make it possible to extend the effect of the currently in force (until 31 December 2023) measure for the non-application of the TCL restriction, namely:

• will retain the ability of creditors to determine the conditions for providing consumer loans / microloans (interest rates) taking into account changes in market conditions;
• will contribute to the effectiveness of the transmission mechanism of monetary policy; and
• will help limit proinflationary risks.

The issue of high interest-bearing bank loans will be moderated by high macroprudential buffers for such loans. In addition, the statutory requirement for all lenders to ensure that an interest rate under a consumer loan (microloan) agreement shall not exceed 0.8% per day remains in effect.