Russia to exempt those fighting in Ukraine from paying loan interest

The Ministry of Finance of the Russian Federation has proposed that participants of the war in Ukraine (or, as Russians call it, the "special military operation") should be exempt from paying interest on loans, and the Russian government has approved a draft law on this.

Source: Russia newspaper Izvestia, citing sources

"Since 7 October 2022, military personnel and members of their families have been entitled to a credit holiday, during which they are exempt from paying off loans without being charged penalties and fines. The benefit is valid during their service and any hospital stay plus 30 days, and at the end of the term, interest is added to the debt in the amount of two-thirds of the average market cost of the full loan.

Under the draft law, when the credit holiday ends, servicemen will only have to repay the principal to banks, interest-free," the report says.

Russian banks will also have to recalculate the payments they have already received on war veterans’ loans, redirecting them towards the principal or repaying the customer’s other loans.

Under the draft law, the state plans to reimburse Russian banks for 50% of their lost interest income, and about RUB 5.7 billion (roughly US$44.2 million) will be allocated from the state budget for this purpose.

The amount of interest payments that banks will have to forgive will total around RUB 11.4 billion (US$88.4 million).

The final losses may be even greater, Izvestia says. So lenders will have a lot of work to do to recalculate all such loans. Experts believe this could result in fewer loans being approved for war veterans.

It makes more sense for banks to approve fewer loans than to take on an increased burden on their capital, market insiders added.

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