Putin Lays Out Aggressive Lending Plans   Leave a comment

sberbankRussian Prime Minister Vladimir Putin laid out aggressive measures to encourage more lending to companies and shore up the troubled Russian banking sector.

Putin urged the Central Bank to lower interest rates now that the threat of inflation has receded.

He has also called on officials to make it easier for banks to recover money from the state in cases where state guarantees back the loans of struggling enterprises.

Plummeting oil prices and a rapid slowdown in demand for its exports has driven Russia to the brink of a recession for the first time in a decade. Unemployment has soared, factories have scaled back production and many companies are locked in sensitive restructuring talks with their lenders.

Responding to calls for lower interest rates, Putin stated no lender that has received state aid should charge interest of more than 16 percent – based on a refinancing rate of 13 percent plus 3 percent. Russian borrowers, who have nearly no access to overseas credit, have often complained that banks are offering loans at exorbitant rates. Many foreign lenders are conducting enhanced due diligence on Russian firms seeking loans.

The government’s efforts to restart lending come as warning signs emerge of growing problems in the banking system.

German Gref, who served n Putin’s cabinet and is now the head of Russia’s largest bank, Sberbank, warned earlier this month that Russia’s banking crisis is only just beginning. He said that bad loans were probably much higher than official figures suggested, and said the state should not encourage banks to increase lending when they still have bad assets on their books.

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