Banks ignored government efforts to raise lending in October and reduced corporate and retail loan books, threatening to choke the commodity-reliant economy’s recovery, according to Central Bank data released Thursday.
Corporate loan books fell 0.5 percent, after declining 0.7 percent in September. Lending to consumers fell 0.7 percent for a ninth consecutive monthly decline. The financial industry’s total assets fell 0.6 percent, while total equity capital advanced 3.1 percent.
Banks are withholding funds as the ratio of nonperforming loans rises, threatening to create a spiral in which households and businesses cannot borrow enough to generate the growth needed to service the debt.
The share of overdue corporate loans rose to 5.9 percent in October, from 5.6 percent the previous month, Central Bank data showed. The percentage for consumer lending increased to 6.6 percent from 6.4 percent.
Banks are lending less, even after one-week interbank rates dropped from 10 percent at the end of March to 5 percent on Thursday, the lowest level this year. Three-month interbank ruble rates dropped to 7.75 percent, from 17.5 percent at the end of the first quarter.
“Both corporate and retail loan portfolios contracted at a slow pace, which is a signal that it is still a problem for banks to find good borrowers,” VTB Capital said in a research note Thursday.