Citibank, the Russian subsidiary of the American financial giant Citigroup, is taking the unprecedented step of forgiving outstanding loans for around 1,000 clients as it prepares to exit the Russian market. The bank began notifying clients via email about the forgiveness of debts, prompting questions about the strategic move as it consolidates its retreat from the region.
Reports from RBC outline how Citibank's action to wipe out these debts is primarily aimed at addressing "problematic loans"—debts the bank has struggled to sell on the market to collection agencies. Many clients received notifications explaining the debt forgiveness and the accompanying return of paid insurance premiums related to the loans, coinciding with the broader operational shutdown initiated by Citigroup back in 2021.
When clients received their emails, they found detailed information on what the forgiveness entailed and the importance of continuing to make regular payments up until the specified date for forgiveness. The bank emphasized, “До даты прощения заемщик должен выполнять обязательства в полном соответствии с кредитным договором” which translates to, “Until the forgiveness date, the borrower must adhere to their obligations fully according to the credit agreement.” This condition aims to prevent any negative impacts on clients' credit histories, as banks prioritize the timely payment of loans.
Experts have remarked on the rarity of such measures. A financial analyst noted, “Ситибанк использует ее «от безысходности» — так он сможет уменьшить количество резервов,” meaning the bank is resorting to this action out of desperation to lessen the reserves they must hold against uncollectible debts. These actions come on the heels of Citigroup's announcement to wind down its retail operations across 14 countries, with Russia being highlighted as one of the focal points.
Backtracking to the history of Citigroup’s involvement, the company had first expressed intentions to divest its retail operations in Russia during the spring of 2021. These plans accelerated following the onset of the conflict in Ukraine, during which time Citigroup sought to disengage from servicing retail and corporate clients, especially those from the small and medium-sized businesses sector.
The exact amount of debt being forgiven remains undisclosed. Still, sources indicate it largely includes problematic loans badly affecting the bank's balance sheet. Clients are advised they may face tax obligations as forgiven debts are treated as income under Russian tax law, meaning they could incur NDFL (income tax) liabilities based on the debt amount dismissed.
Despite the challenges within the sector, client responses to the news of debt forgiveness have mixed reactions. While the relief from repayment is welcomed, many remain anxious about the unexpected financial consequences of tax liabilities arising from this forgiveness. Clients are encouraged to review the full terms of their notifications and consult tax professionals to fully understand their responsibilities based on the sum forgiven.
Tax advice includes paying any applicable taxes by December 2026, emphasizing the necessary preparedness needed moving forward. Overall, as Citibank implements this debt forgiveness strategy, the outcomes will bear heavily on both the affected clients and the Russian financial market, evaluating the long-term impacts of this historical financial maneuver.
Citibank’s decision to forgive loans reflects broader economic adjustments stemming from geopolitical developments and serves as a cautionary tale to both borrowers and lenders alike, as they navigate the increasingly unpredictable financial environment.