New regulations for commercial banks to protect consumer rights in Georgia

New regulations on responsible lending practice set by the National Bank of Georgia (BOG) for commercial banks are coming into force today.

The regulations aim to protect consumer rights and bolster healthy credit portfolios at commercial banks.

Starting from May 7, 2018 commercial banks in Georgia will be restricted in issuing loans without meaningful analysis of consumers’ solvency. The total amount of these loans must not exceed 25 percent of the supervisory capital of commercial banks.

Also, the total amount of loans guaranteed by real estate must not exceed 15 percent of the bank’s supervisory capital without an analysis of the client’s solvency, while the loan to value ratio must not exceed 50 percent when issuing a loan, the NBG announced.

As explained, over the past years debts of individual households have been growing at high rates and additionally, the practice of crediting physical bodies with higher loan liabilities has also been growing. Many clients have overdue loans and the volume of responsible crediting has been diminishing recently in Georgia.

To overcome this challenge the NBG set regulations which have also received support from the finance ninistry of the country.

Finance Minister Mamuka Bakhtadze thinks that excessive indebtedness is a serious problem in Georgia and the situation should be improved through regulations.

Bakhtadze also said that the new regulations will not be set only for commercial banks but also for fast, online loan services as well.

Georgian banks lent 22.2 million GEL last month, which was 286.6 million GEL or 1.3 percent more compared to the previous month.