New measures to support Bank of Russia is aimed at maintaining the ability of the financial sector to provide resources to the economy, to protect the interests affected by the pandemic citizens and the affordability of payments for the population and to adapt the financial sector to the restrictive measures against the virus.
So, the Central Bank has advised that banks, microfinance organizations and credit cooperatives to restructure the debt and not accrue interest and penalties to borrowers who have discovered coronavirus. Similar recommendations, the regulator gave and insurance companies.
Also in connection with the spread of the coronavirus, the Bank of Russia can limit the fee for acquiring payments with online orders of food and medicine.
in addition, from may 1 the banks can not charge commissions from individuals for transfers in the System of quick payments to 100 thousand roubles a month.
Interest on loans and deposits can grow, but the maximum 1 percent
To support mortgages, the Bank of Russia lowered the premium to the risk ratios for housing loans, which will be provided from 1 April. This decision will help borrowers with low down payment and high ratio of debt/income. For mortgages with low initial payment (10%), redeemable at the expense of the parent capital, allowances for risk factors will now diminish as repayment of the loan.
Small and medium business in the conditions of a pandemic is one of the most vulnerable sectors of the economy. Therefore, the Bank of Russia expanded the program to refinance loans to small and medium enterprises (SMEs). In addition to the tool, aimed at limiting interest rates on loans to borrowers, introduces a new instrument of refinancing limit of 500 billion rubles to maintain lending to SMEs. Under both instruments on March 23, the interest rate of the Central Bank is set at 4%. The final interest rate on loans to SMEs should not exceed 8.5%, sectoral restrictions on lending are removed.
Transfers from Bank to Bank to 100 thousand roubles per month will be free
According to the Central Bank, increased consumer demand for products due to the coronavirus, the decline in oil prices and, consequently, the ruble creates conditions for short-term acceleration in consumer prices. But then with inflation it will be quite wrong. On the background of the epidemic in Russia and in the world demand slows down (due to quarantines, the remote format of the work, closure of borders). People have fewer opportunities to make purchases of goods and services, it creates pressure on the business, and hence on the income of citizens, said at a press conference the head of the Bank of Russia Elvira Nabiullina. In the medium term, it will, on the contrary, to slow down inflation, calculated at the Central Bank.
Thus, inflation in 2020 do not only catch up with the current very low position purpose the Bank of Russia’s “near 4%”, but may even exceed it, made Elvira. But in 2021, the balance must be restored, and inflation to return to target.
taking into account the balance of risks to the economy, inflation and financial sector stability, the Bank of Russia decided not to change its key rate, leaving it at 6% per annum. However, Nabiullina made at the next meeting and raising and lowering of the key rate – all depending on the situation on the financial market. According to chief economist of Alfa Bank Natalia Orlova, the Central Bank at the next meeting in April will take another pause in rate, whereas in the second half of the year could potentially open a window to lower it. The key interest rate at year-end may reach 6.25 per cent, if the price of oil and the ruble exchange rate more stable will remain at current levels – it can grow up to 7%, admits economist for Russia and CIS “Renaissance Capital” Sophia Donets.
the Current saving rate, however, does not mean that the banks will not change rates on loans and deposits – and they are determined by what is happening in the market, especially rising yields. Therefore, in the coming months not to rule out a rate hike by banks, but it is unlikely to exceed even 1 percentage point, says Director-head of Bank ratings Agency NKR Mikhail Doronkin.
In particular, some banks have already started to raise mortgage rates. According to Nabiullina, the behavior of interest rates on housing loans this year will also depend on market conditions. But in the period up to 2024, as provided for in the thematic project, they should fall to 7-8%, informed the head of the Bank of Russia. In February, before the destabilization of the markets, average mortgage rates, according to the regulator, were at a historic low – is 8.84%.
As niginigi got under the hand
the Bank of Russia is against direct payments to citizens to stimulate demand, as it is proposed to make in the United States. They discussed payments to families with incomes less than 75 thousand dollars a year to $ 1,200 for each adult and $ 500 per child.
Banks record a sharp increase in demand for consumer loans
It is the stimulation of demand through “throwing money from a helicopter”. Previously the world’s leading Central banks to tackle the shortage of dollar liquidity resets its rates and launched unprecedented programs of quantitative easing (QE) – injecting money into the economy through the purchase of debt assets. The European Central Bank increasing QE, did not, however, lower the rate even further into negative territory – negative effect for banks and savings from this is too high. From quantitative easing benefit the participants of the financial markets and the “helicopter” money needs to support the real economy, expects the analyst of “VTB Capital” Neil McKinnon.
“In our situation such a need (in direct payments. – Approx. ed.), of course not, – said Elvira Nabiullina. – At us and at the rate there is a large backlog, and other measures which will support both citizens and consumer spending, and revenue.” She recalled that the support of demand through direct payments to citizens resorted to when other measures are exhausted. That is the basic interest rate reduced to zero or negative values, conducted an extensive program of redemption of securities from the market, “bloated” balance sheets of Central banks.
According to Nabiullina, the effect of such measures is difficult to assess. “A lot of questions to ensure that the money will get to consumers and will cause a corresponding increase in consumption propensities and stimulate demand,” she said.