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Deceleration of Corporate Lending in Russia

Interest rates can top as much as 20% in Russia! The weak state of the Russian economy is forcing banks to increase collateral levels, which inherently compresses lending. Corporations and small businesses are finding it impossible to secure a line of credit. According to the SME Bank, a state run bank, small businesses can face interest rates in the range of 15-17 percent. These astronomical rates are driving many companies to seek lending outside the country or go bust.

Inflation in the country is above the 6% targeted rate. Compared to 2012, loan issuance is down 12% year to date. Among the BRICS, Russia has the highest benchmark rate at 8.25%, which has not budged since it was increased last year. According to Bloomberg, policymakers are in the process of significantly lowering borrowing rates by dipping into their sovereign wealth funds. The Central Bank of Russia is predicting stagnation.

Image source: foreignpolicy.com)