Russian banks are raising rates on already issued loans

Russian banks, amid the global financial crisis, have begun raising rates on already issued credit cards, and this process seems to be only gaining momentum. Absolute Bank and MBRR were first to report tariff increases, and other major players have also announced possible hikes. Why banks are taking this step and what it may mean for borrowers is in the report.

All Russian banks have tightened their requirements for borrowers — this is already an established fact, and we are gradually getting used to it. But the impact of the global financial crisis on banks’ policies does not end there. Banks are incurring losses and are taking new measures to attract capital.
One of them has been raising rates on already issued credit cards by an average of 4-9%.
The first to announce a rate increase was Absolut Bank, which raised rates on all credit cards by 3-4%. Next, MBRR (Moscow Bank for Reconstruction and Development) increased the rate by as much as 9%. UniCredit Bank and Avangard have announced upcoming rate increases. And this list is likely to keep growing.
Credit cards are the most profitable product for banks thanks to interest on the loan, as well as fees and penalties charged to debtors.
The bank’s ability to raise the interest rate is usually stipulated in the agreement with the borrower. The bank has the right to change or supplement tariffs at its own discretion. And this measure, according to most experts, is quite logical. However, raising rates may lead to mass defaults and lawsuits from borrowers, since their financial capabilities are already limited today.