How will banks calculate the indicator of debt load?

On October 1, the next innovation will start for banks, which will have to calculate the debt burden indicator (PDN) of customers when issuing loans for amounts exceeding 10 thousand rubles.

What changes will you come at the beginning of October?

The next month is the time of entry into force of Bank of Russia Ordinance No. 4892-U, requiring banks to calculate the PDN – an indicator of the borrowers’ debt burden in cases where the amount of the loan issued exceeds 10 thousand rubles, and also deciding to increase the credit card limit extending the term of a loan agreement or restructuring debt.

PD is the ratio of the average monthly payments of the borrower for all loans to the value of his average monthly income.

The algorithm for calculating the debt ratio

The transfer of information on the amount of average monthly payments on all loans held by customers to banks will be carried out from the credit history bureau (BKI).

In the calculation, the monthly payment for each loan (its amount) will be taken into account together with the amount of overdue debt (if any). In addition, the bank must take into account the monthly payment (amount) of the loan, which was again issued to the borrower.

To calculate the indicator, the bank is given a period of up to 5 days after the BKI transfers information to it.

Information regarding the average monthly income can be taken from the bank’s 2-personal income tax certificate, an extract on the condition of an individual’s personal account in the compulsory pension insurance system, a certificate of salary (must be confirmed by the employer), and statements will also help on accounts (salaries are credited to them), etc.

Usually, banks take into account information on income received by the borrower at the main place of work for the year, i.e. the period that ends 2 calendar months before the calculation of personal income tax (not earlier).

Additionally, the bank can use the credit reports provided by BKI. But then the average monthly income of the borrower should not be more then 2 times higher than the arithmetic average of the monthly payments for all loans for 2 calendar years that precede the month of calculating the personal income tax (in other words, the bank, not having other income data, evaluate the borrower based on information about the loans that he took before).

The list of supporting documents that banks are entitled to use when determining the average monthly income contains a new instruction from the Central Bank.

If the consumer wants to transfer his/her money to anyone banks that time you can use for the PNC Routing Number it’s easy to use and secure process borrower was unable to provide any of them, the bank is entitled to use other documents or the arithmetic average of the regional officially published average per capita income – as a result, the bank will take into account the lower of the 2 ratings.

Reason for innovation

The idea of ​​making all these changes, in fact, can be called the first step in the desire to resolve the debt burden of borrowers – individuals and to limit the risk associated with their loans.

What Do changes await banks and BKI?

The main purpose of using the value of the PDA indicator by banks are to determine premiums to risk ratios in assessing capital adequacy; when determining the risk coefficient for a loan, banks will proceed from a combination of PDN and the value of the total cost of the loan (CPM).

Presumably, thanks to the introduction of PDN, the capital stock of banks will increase, which, if necessary, they will be able to cover the risks associated with the borrowing of certain categories of borrowers: if a bank issues a loan with a high PDN, the load on its capital will increase significantly.

To implement this tool, significant changes are needed from the participants of the consumer lending market – this also applies to infrastructural changes in the field of interaction between banks and credit institutions, the development and expansion of credit report formats, and the need to create a mechanism that will provide banks with information from all credit institutions.

What changes should the borrowers expect?

The launch of PDN from October 1 is not worth considering as a ban on the issuance of loans to customers, then the debt burden is high: the bank can continue to issue consumer loans at any rate if the load on its capital is acceptable.

In the case of high personal income and, consequently, a load on capital, the bank decides on its own whether it is worth giving loans to some groups of borrowers – in this case, customers with a high credit load are unlikely to receive new loans from this bank.

What will happen next?

After the requirements for mandatory calculation of personal income tax and accounting for personal income tax when assessing capital adequacy are introduced, the Central Bank has already planned the development and improvement of its regulation mechanism.

Perhaps the next step will be related to the launch of measures restricting lending to borrowers with a high personal income tax (the regulator is currently working on the relevant legislative acts, banks and banking associations also participate in the process).

The fact that PDN will be introduced as early as October 1, 2019 can only be called the first step.

Presumably, before the restrictive measures are introduced, all market participants and the regulator will already have experience working with the new indicator, and it will consist in introducing the mandatory calculation of PDN, adapting the procedures for assessing capital adequacy and mandatory regulatory reporting, so the Bank of Russia will accumulate statistics on what is the real level of debt on the market.

A publication has already been published on the Bank of Russia website and started an active discussion of a plan for further improvement of the infrastructure so that in the future all credit organizations can fairly and uniformly calculate PDNs and determine future measures for regulating PDNs in the consumer lending market.

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