Credit holidays and restructuring:
the effectiveness of measures to support borrowers

Financial difficulties can suddenly overtake any borrower – job loss, illness or economic crisis can seriously undermine solvency. In such situations, the state and financial institutions offer special support measures: credit holidays and debt restructuring. These tools help citizens cope with temporary difficulties, and banks – maintain the quality of the loan portfolio. This study examines the mechanisms of these programs, their effectiveness for different categories of borrowers and the impact on the banking system as a whole.

The essence of measures to support debtors

What is a credit holiday?

Credit holidays are a temporary deferment of loan payments for up to 6 months. During this period, the borrower can completely suspend payments or significantly reduce their size. Banks provide this opportunity to citizens who find themselves in a difficult financial situation due to a decrease in income or other life circumstances.

Next year, the opportunity to receive a credit holiday applies to any loans and credits, including consumer loans, mortgages, car loans and credit cards, not exceeding certain amounts. The borrower can use this right once if the income decreases and again if he/she suffered from an emergency. It is important to understand that credit holidays do not write off the debt, but only provide a temporary respite. After their end, the loan continues to be repaid, and the repayment period is extended for the period of the holiday.

What is debt restructuring

Debt restructuring is a change in the terms of a loan agreement in order to reduce the financial burden on the borrower. It is regulated by Federal Law No. 127-FZ of 26.10.2002 and represents a more profound change in the terms of the loan than a holiday. The procedure is beneficial to both the bank and the borrower, as it allows for a quick and litigation-free agreement to continue payments on new terms.

Restructuring may include the following changes:

• Extension of the loan term
• Interest rate reduction
• Changing the loan currency
• Forgiveness of part of the debt
• Consolidation of several loans into one

If the decision on restructuring is positive, the accrual of fines for delays and penalties is stopped, and enforcement proceedings are suspended. If the property was previously seized, it is lifted. The financial claims of creditors are frozen, including microfinance organizations that are not included in the rating of the best MFIs - now they can interact with the debtor only through the judicial body according to the regulations.

Differences from refinancing and bankruptcy

Although restructuring has similarities with other methods of resolving credit problems, there are fundamental differences between them:

Refinancing is obtaining a new loan on more favorable terms to pay off the current one. The main difference from restructuring is that when refinancing, the borrower usually changes the lender and completely closes the previous loan.

Bankruptcy is an extreme measure when a debtor is recognized as unable to pay debts. As a result, debts can be written off, but this entails serious restrictions for the debtor, including a ban on holding management positions and taking out new loans.

The choice between these instruments depends on the specific situation of the borrower, the amount of debt and the prospects for restoring solvency. In case of temporary difficulties, the optimal solution may be a credit holiday, in case of more serious problems - restructuring, and in a hopeless situation - bankruptcy.

Legal basis and mechanism of work

Legislative regulation in Russia

Credit holidays in Russia are regulated by several regulations. Since January 1, 2024, changes have come into force that expand the possibilities of receiving them. Now holidays are available not only when income decreases by 30%, but also in emergency situations.

The terms of credit holidays are regularly reviewed by the government, taking into account the economic situation in the country. The Bank of Russia also issues recommendations for credit institutions regarding work with borrowers experiencing financial difficulties.

Debt restructuring is regulated by Federal Law No. 127-FZ of 26.10.2002. According to this law, a citizen must have a sufficiently stable income to pay off the debt within five years. He must not have any criminal record for economic crimes.

It is important to note that if an individual has recently gone bankrupt (within the last five years) or has undergone restructuring (eight years), then the debt restructuring procedure becomes unavailable.

Conditions for providing assistance

To receive a credit holiday, the borrower must meet certain criteria:

1. Income for the two months prior to application has decreased by at least 30% compared to the average monthly income for the previous 12 months, or the borrower has suffered from an emergency.
2. The loan amount does not exceed the established limits: - For car loans - 1.6 million rubles - For consumer loans - 450 thousand rubles - For credit cards - 150 thousand rubles

The presence of overdue debt does not prevent you from applying for a credit holiday if the credit agreement is valid and enforcement proceedings have not been initiated on the loan and a settlement agreement has not been concluded.

To restructure the debt, the borrower must have a stable income and no criminal record for economic crimes. The conditions under which the debt can be restructured are determined by Federal Law No. 127-FZ of 26.10.2002.

The design process

The process of applying for a credit holiday includes several steps:

1. Collection of documents confirming a difficult life situation (income certificates, medical documents, etc.). The list of documents depends on the specific bank.
2. Contact the bank in any available way: in person at a branch, through the website or mobile application, by registered mail with a delivery confirmation or by delivering a demand against a signature.
3. Waiting for a decision. The bank is obliged to review the application within 5 days and, if approved, notify the borrower of the change in the terms of the loan agreement by sending a notice and an updated payment schedule.

Credit holidays begin on the date of the request, unless the borrower specifies another date. After the grace period ends, the loan term increases and the monthly payment amount remains the same.

The process of debt restructuring through the court is more complicated and requires the participation of lawyers. The borrower files an application, which is considered by the court. If the decision is positive, a financial manager is appointed who develops a restructuring plan, which must then be approved by creditors and the court.

Types of assistance programs

Standard credit holidays

Standard credit holidays are available to citizens whose income has decreased by 30% or more compared to the average monthly income for the previous year. This is the main mechanism for supporting borrowers, which will operate on a permanent basis from January 1, 2024.

Such holidays are provided for a period of up to 6 months, during which the borrower can completely suspend payments or reduce their size. After the end of the grace period, the loan continues to be repaid according to the standard schedule, but with an extended term.

It is important to understand that interest on the loan continues to accrue during the holiday period, which ultimately increases the total amount of payments. However, this is much more profitable than accumulating overdue payments and paying fines.

Special programs for victims of emergencies

A separate category of credit holidays is intended for persons affected by emergency situations: accidents, catastrophes and natural disasters. In this case, the borrower does not need to prove a decrease in income - it is enough to confirm the fact of involvement in the emergency.

The key advantage of this type is the ability to get a holiday even if standard credit holidays have already been used. This allows you to get additional support in critical situations.

The duration of such holidays is also up to 6 months. Depending on the scale of the emergency and its consequences, the government may introduce additional measures to support affected borrowers, including special restructuring programs.

Support programs during COVID-19

During the COVID-19 pandemic, special support programs for borrowers were introduced. The Bank of Russia recommended that financial institutions ensure the protection of clients in the context of the spread of coronavirus.

Banks, microfinance organizations and credit cooperatives were advised to consider the possibility of debt restructuring and not to charge penalties and fines on loans. The program concerned not only those infected with COVID-19, but also all those who found themselves in a difficult financial situation due to forced unemployment amid the epidemic.

Many banks provided the opportunity to apply for restructuring online without visiting a branch. For example, Sberbank allowed private clients to do this on the bank’s website, and representatives of small and micro businesses - through the Sberbank Business Online system.

This experience demonstrated the effectiveness of measures to support borrowers in crisis situations and became the basis for the development of permanent mechanisms for credit holidays and restructuring.

Pros and cons for borrowers

Benefits of credit holidays

Credit holidays provide borrowers with a number of significant advantages:

1. Temporary reduction of the debt burden. This measure helps to temporarily relieve the borrower of the financial burden, giving the opportunity to restore solvency.
2. Interest rate stability. During the holidays, the interest rate remains unchanged, which makes the conditions transparent and predictable.
3. Maintaining a credit history. The absence of monthly payments does not negatively affect the borrower’s credit history, which is important for future lending.
4. Protection from fines and penalties. During the holiday period, the bank does not have the right to charge fines for late payments and penalties, which helps to avoid debt growth.
5. Preservation of property under pledge. With a mortgage or car loan, the borrower can continue to use the property without fear of its forced seizure.

These advantages make credit holidays an effective tool for temporary support of borrowers facing financial difficulties.

Disadvantages and pitfalls

Despite the obvious advantages, credit holidays have their disadvantages:

1. Limited grace period. The grace period is up to 6 months, which may not be enough to fully restore the financial situation of some borrowers.
2. Payment transfers. Unpaid payments are transferred to the end of the loan term, which significantly increases its overall duration.
3. Interest continues to accrue. Although payments are suspended, interest on the loan continues to accrue, increasing the total amount owed.
4. Potential Restrictions on Refinancing: Some research suggests that borrowers who take advantage of the forbearance period may face difficulties when trying to refinance their loans in the future.

When debts have become too large and there is no possibility to pay them off, credit holidays will not help to solve the problem. In such a case, a more effective measure may be the bankruptcy procedure, after which the debts are written off.

When to Choose Restructuring

Restructuring may be a more appropriate option in the following cases:

1. If you have a stable but insufficient income for current payments, restructuring allows you to reduce the amount of monthly payments for a long period, and not just for the period of credit holidays.
2. When a fundamental revision of the loan terms is required. Unlike a holiday, restructuring may include a change in the loan currency, a reduction in the interest rate, and other significant changes.
3. If you have several loans. Restructuring allows you to combine several loans into one with more favorable terms.
4. When a six-month grace period is clearly not enough to restore your financial situation, restructuring may provide a more long-term solution.

It is worth remembering that debt restructuring through the court is a more complex procedure, requiring the participation of lawyers and financial managers. However, it can offer a more comprehensive solution in case of serious financial difficulties.

Impact on the banking system

Short-term effects for banks

The introduction of credit holidays has a direct impact on the banking system. According to estimates by the National Rating Agency (NRA), the total value of the loan portfolio affected by credit holidays during the COVID-19 pandemic amounted to about 2.8 trillion rubles, or about 14% of the amount of loans issued to individuals and small and medium-sized businesses (SMEs).

Short-term effects include:

1. Decrease in liquidity. Banks are temporarily not receiving payments on loans, which affects their liquidity. According to NRA estimates, the volume of liquidity lost by banks due to credit holidays in the SME segment amounted to about 38-47 billion rubles.
2. Increase in operating expenses. Administration of credit holidays and restructurings requires additional resources from banks.
3. Temporary reduction in profitability. Although interest continues to accrue, its payment is delayed, which affects the current income of banks.

At the same time, credit holidays help prevent mass defaults by borrowers, which is ultimately beneficial for the stability of the banking system.

Long-term impact on the financial sector

In the long term, the impact of credit holidays and restructuring on the financial sector can be assessed as mixed:

1. Increased stability of loan portfolios. Research shows that borrowers who take advantage of credit holidays are more likely to return to a normal payment schedule after the grace period ends.
2. Reducing the level of problem loans. Timely restructuring helps prevent temporary financial difficulties from turning into irreversible insolvency.
3. Developing mechanisms for working with problem loans. Banks are improving procedures for assessing the financial position of borrowers and restructuring methods.

According to the Bank of Russia, more than 76% of borrowers returned to the payment schedule under the agreement after the end of the credit holidays, which indicates the effectiveness of this support measure.

Risks for credit institutions

Despite the positive aspects, borrower support programs create certain risks for credit institutions:

1. Abuse of holidays. Some borrowers may use credit holidays even when there is no real need, which leads to banks receiving unjustified shortfalls in funds.
2. Masking problem loans. Providing holidays and restructuring can temporarily hide the true quality of the loan portfolio.
3. Regulatory risks. Banks that do not comply with recommendations for working with borrowers may face sanctions from the regulator.

The European Central Bank (ECB) notes the need to improve processes for handling restructurings and payment deferrals. In particular, banks are advised to:

• Carefully analyze the financial situation of clients before granting holidays
• Have a full set of restructuring tools for different situations
• Assess the client’s solvency taking into account various scenarios
• Regularly monitor the effectiveness of support measures

Effectiveness of support measures

Program usage statistics

Statistics show high demand for borrower support programs. According to the Bank of Russia, from March 20 to May 6, 2020, borrowers submitted more than 1.4 million requests to change the terms of loan agreements, including 210 thousand requests for credit holidays. The share of satisfied applications was about 59%, for credit holidays - about 63%.

In the small and medium business lending sector, credit holidays affected about 20% of the loan portfolio and extended to a loan volume of about 1 trillion rubles. In the consumer lending and mortgage lending sector, holidays affected about 15% and 5% of the corresponding loan portfolios and extended to a loan volume of about 1.8 trillion rubles.

These data indicate the widespread use of support measures by borrowers of various categories and the significant scale of their application in the Russian economy.

Return to normal payments after the holidays

One of the key indicators of the effectiveness of credit holidays is the ability of borrowers to return to a normal payment schedule after the end of the grace period.

According to the Bank of Russia, more than 76% of borrowers returned to the payment schedule under the agreement after the credit holidays ended. This indicates that temporary assistance really helped most borrowers overcome financial difficulties and restore solvency.

Research shows that providing payment holidays does not lead to the formation of a habit of not paying loans, but on the contrary, helps borrowers maintain financial discipline and avoid serious violations of credit obligations.

Long-term stability of borrowers

Recent research from the University of California, Berkeley, shows that providing mortgage forbearance during the COVID-19 pandemic led to a significant reduction in mortgage delinquency rates — up to 5 percentage points — and a 1 percentage point reduction in foreclosure rates. These effects persisted for three years after the forbearance ended.

Moreover, the program had positive spillover effects on the stability of revolving credit, reducing credit card delinquencies by 2 percentage points and utilization rates by about 15 percentage points compared to pre-pandemic levels.

After exiting the deferment regime, borrowers not only avoided negative consequences, but also maintained improved financial stability for more than two years after the implementation of these support measures.

International experience

Support programs in different countries

During the COVID-19 pandemic, many countries have implemented similar programs to support borrowers. For example, the Andorran government approved a legislative moratorium in April 2020, providing a payment deferral until December 31, 2020, for households and businesses affected by the pandemic.

In June 2020, the Andorran Banking Association adopted a sectoral moratorium, not provided for by law, to provide payment deferrals to households and businesses for 6 to 12 months, depending on the type of loan and the borrower. In mid-December 2020, the deadline for applications for the moratorium was extended to 31 March 2021.

The Andorran Financial Supervisory Authority has adopted the European Banking Authority’s guidelines on statutory and non-statutory moratoriums and has introduced additional measures in line with the recommendations of the European Central Bank.

Results of research by foreign experts

Research by the International Monetary Fund (IMF) shows that loan moratoriums support borrowers facing short-term payment difficulties, but can undermine credit discipline if not implemented properly.

The European Banking Association reported that as of June 2020, the nominal volume of loans for which repayment moratoriums were granted amounted to 871 billion euros, which is about 6% of total bank loans.

Moratoriums on loan payments were widely used in many countries and were particularly common for loans to small and medium-sized enterprises. There was some increase in non-performing loans after the moratoriums expired, but it was much smaller than initially expected.

Best Practices

Based on international experience, several best practices in the field of borrower support can be identified:

1. Differentiated approach to different categories of borrowers. Support programs should take into account the specifics of different market segments: mortgages, consumer loans, loans to small and medium businesses.
2. Combination of legislative and voluntary measures. An effective system of support for borrowers includes both mandatory measures prescribed by law and voluntary programs of banks.
3. Transparency of terms and procedures. Borrowers should clearly understand the consequences of using a credit holiday or restructuring, including the impact on the overall cost of the loan.
4. Timely identification of borrowers in difficulty. Banks should actively identify customers who may be in difficulty and offer them appropriate solutions before delinquencies occur.
5. Regular monitoring of the financial status of borrowers after support is provided. This allows for timely adjustment of lending conditions if the situation worsens or improves.

Prospects for the development of support programs

Directions for improving legislation

Legislation in the area of borrower support continues to evolve. Potential areas for improvement include:

1. Expanding the grounds for granting credit holidays. In addition to a decrease in income and emergency situations, additional grounds may be considered, such as serious illnesses or significant unforeseen expenses.
2. Flexible approach to the duration of the grace period. Instead of a fixed term of up to 6 months, it is possible to introduce the possibility of extending it in special cases.
3. Development of pre-trial settlement mechanisms. This will reduce the burden on the judicial system and speed up the restructuring process.
4. Clarification of the procedure for restructuring citizens’ debts. It is necessary to simplify and speed up this procedure, making it more accessible to a wide range of borrowers.

The Bank of Russia regularly reviews recommendations for credit institutions depending on the economic situation. For example, in April 2025, the Central Bank extended the recommendation for creditors to restructure borrowers’ loans and not to forcibly evict debtors from housing until the end of 2023.

Technological solutions for process optimization

Modern technologies create new opportunities for optimizing borrower support processes:

1. Automated financial assessment systems. Artificial intelligence and machine learning can analyze large amounts of data and identify borrowers who may need assistance.
2. Digital platforms for credit holidays and restructuring. These platforms allow borrowers to apply and receive decisions online, without having to visit the bank.
3. Personalized financial advice: Technology makes it possible to provide borrowers with individual recommendations on how to improve their financial situation.
4. Systems for monitoring the effectiveness of support measures. Analytical tools help evaluate the results of various programs and adjust them if necessary.

Many banks are already implementing these technologies. For example, during the COVID-19 pandemic, Sberbank provided the opportunity to apply for restructuring online without visiting a branch.

Balance of interests of borrowers and creditors

The key challenge in developing borrower support programs is finding a balance between the interests of borrowers and creditors. On the one hand, it is necessary to provide real assistance to people in difficult financial situations. On the other hand, excessively favorable conditions can destabilize the banking system and create the wrong incentives for borrowers.

To achieve this balance, the following approaches can be proposed:

1. Differentiation of support measures depending on the causes of financial difficulties and the prospects for overcoming them.
2. Combining payment deferrals with financial recovery measures for borrowers, such as financial literacy programs and personal finance counseling.
3. Division of responsibility between all participants in credit relations: borrowers, creditors and the state.
4. Transparency and predictability of the rules for providing assistance, which will allow borrowers and lenders to plan their actions.

Experience shows that debt relief programs are most effective when they are precisely targeted to those who really need help and combine short-term debt relief measures with long-term solutions to restore financial stability.

Results and conclusions

Credit holidays and debt restructuring are important tools to support borrowers facing temporary financial difficulties. These measures have proven their effectiveness both in Russia and abroad, especially during the COVID-19 pandemic.

Statistics confirm that most borrowers who use these tools return to a normal payment schedule after the grace period ends. Research also shows a positive long-term effect on borrowers’ financial stability.

At the same time, it is necessary to continue improving the legislation and practices of applying these instruments, taking into account the interests of both borrowers and creditors. It is important to develop technological solutions to optimize processes and improve the financial literacy of the population.