Natalia Leontyeva, a Siberian sales manager, bought a second hand car in 2013 with a loan worth about four monthly salaries. She now owes the equivalent of at least four years of earnings, one of a growing number of Russians struggling with debt. "You pay one month's installment, then the second. But then something happens again and it all piles up," she said by phone from the city of Novosibirsk in Siberia where she works at a steelworks. After five years of shrinking real incomes, many Russians are borrowing to make ends meet or even just to pay off their creditors - and the issue is climbing up the political agenda. "A third of those people taking loans already owe more than their annual income," Maxim Oreshkin, Russia's economy minister, told Reuters. "This is an issue of financial education, a debt trap, in some cases worse than gambling." For Russia as a whole, the burden of total household debt is relatively low, partly because only 5.5 million of its 147 million people have mortgages. But interest rates on personal loans are high and more than half of Russians surveyed by state pollster VTsIOM said they had debts. For a significant number, they are a major concern. Some 2.5 million people earning up to 20,000 roubles ($303.09) a month, which is less than half the average wage, spend more than half of that on loan repayments, the National Association of Professional Collection Agencies estimates. On Wednesday, President Vladimir Putin discussed consumer debt with Andrey Kostin, head of second-biggest state-run bank VTB, telling him in televised comments, "people should not be pushed to some kind of extreme state". Kostin told Putin he understood the problem and that banks should wear a "human face" when dealing with its clients. Their exchange highlighted the sensitivity of the problem for Putin, whose popularity ratings have slipped since he was reelected by an overwhelming majority last year. Moscow is in the grip of protests over the exclusion of opposition candidates from a local election and sporadic protests over issues ranging from waste disposal to unwanted construction have flared elsewhere. The central bank has tightened lending rules in recent years, and raised the amount of money banks need to set aside to cover loan losses. This has moderated the potential fallout for the financial system but Oreshkin said borrowers are still exposed. "In consumer lending, there is high indebtedness and ... it is growing at a rate far higher than the nominal increases in incomes," he said. Outstanding loans were 16.3 trillion roubles ($248 billion) as of early July, up from 10.6 trillion five years ago, according to central bank data. And while the rate of consumer lending increase has dropped from a 60% year-on-year peak in 2012, it was still over 20% last year despite the central bank's attempts to rein it in. -Reuters
