UPDATE 1-Russia banks may need $16 bln extra provision by '10

* Banks may need 500 billion roubles to add to provisions

* Bad loans may rise to 10.3 percent by year-end

(Adds details, background)

MOSCOW, July 10 (Reuters) - Russian banks may have to channel up to 500 billion roubles ($15.7 billion) into extra provisions at the start of 2010, when a temporary relaxation of reserves rules expires, central bank data showed on Friday.

Russia's 1,100-plus banks have been badly hit by the stock market collapse and the deterioration of asset quality in the second half of 2008. This forced the central bank to ease controls on provisions against doubtful loans for a year.

"The savings (due to the eased regulations) may amount to 400-500 billion roubles by the year-end. In fact, these savings are postponed expenses," the central bank's chairman Sergei Ignatyev said in a report to the National Banking Council, a copy of which was obtained by Reuters.

The regulator had said it has not yet made a decision on whether to prolong the relaxation of the rules into 2010.

The central bank expects non-performing loans to rise to 8.5 percent of the total loan portfolio in a moderate scenario and 10.3 percent in a pessimistic one by the end of this year, from around 4 percent as of June 1.

Ignatyev had earlier said he saw the chances of the second wave of the banking crisis as "negligible" but Pyotr Aven, the president of Alfa bank, Russia's biggest privately owned lender, has said hundreds of small banks may fall as bad loans rise. (For a Factbox on Russia's banks struggle with bad loans, click: [ID:nL1722478]) (For more on the Russian financial crisis click on [ID:nCRISISRU]) ($1=31.88 roubles) (Reporting by Dasha Korsunskaya; writing by Dmitry Sergeyev; Editing by Mike Nesbit)