It revealed it had set aside more than 90 billion Roubles for potential bad loans, up twelve fold on the same period a year earlier, while affirming that at the end of March its bad loans were just 3.5% of its loan portfolio.

Bad loan forecasts for the Russian banking sector by the end of this year range from the Central bank’s official estimate of about 10% to Standard and Poor's who say it could soar as high as 35%.

Unlike the U.S. where borrowing by heavily indebted consumers was pushed too far by financial players who had lost any sense of risk, in Russia the big risks come from large corporations. David Jones, Chairman and CEO of debt collector Pristav, says Russian consumers generally having nothing to fear.

“The retail side is way underlevered and that is the argument for continued support for consumer finance in Russia. That the amount of borrowings of the average Russian is very low compared to western Europe, the U.S. or even eastern Europe. Very conservative. And so I just don’t see it being a big problem that a lot of people do. It’s a misunderstanding. Corporate is where the problem is.”

Corporate borrowing in Russia is 3 times larger than retail. But the relative fiscal rectitude of Russian consumers isn’t likely to help them if the corporations and magnates, in particular, who employ them, have to lay them off because of their borrowings, and the economy as a whole will be hit if banks simply stop lending because of the risk of loans turning bad.

The Government has pushed for lending to continue, while offering support for banks to recapitalize while they restructure their loan portfolios.

The Government recapitalized big banks – and the banks tried to restructure their bad loan portfolios. But simple maths does not produce a promising outlook, according to Natalya Orlova, Chief Economist at Alfa-Bank.

“They are facing $200 billion of debt payments, so the difference between $70 billion of their own money of their net profit, and the $200 billion they will have to pay, is $130 billion. So this is the potential NPL's in the very worst case scenario. This figure of $130 billion represents 30% of their corporate loan book.”

Low interest rates cannot help the banks – many companies cannot afford to the principle. The only hope for the banking sector is economic recovery and greater availability of long term lending.