Georgian central bank simplifies lending rules for individuals:
What’s changing?

The National Bank of Georgia (NBG) has approved changes to lending regulations to individuals that will come into force on April 15, 2020.

NBG said that the purpose of the changes is to move from “a rule-based approach to a more principles-based” approach.

Such an approach requires less interference in the management of lending, which will increase the role of the financial institution's risk management function and increase access to finance for the solvent population”, reads the statement published by the NBG.

The amendments aim to simplify the process of borrowing for solvent borrowers, reduce bureaucratic burdens, increase flexibility and, as a result, make the lending process more efficient.

These are the key amendments:

• An analysis of a potential borrower's earnings will still be mandatory, however financial institutions will be able to themselves define how to determine income.
• The limit on loan servicing ratio (PTI) will be cancelled.
• The number of PTI lending buckets will be reduced from four to two. The PTI ratio will remain different for foreign currency loans, which aim to protect the borrower and the foreign exchange rate fluctuations of the financial system from risks. 
• Mortgage maturity limits will increase: maximum maturity for mortgages in national currency, the lari,  will increase from 15 to 20 years.
• If an individual receives income from abroad, the loan-to-value (LTV) ratio (a financial term used by lenders to express the ratio of a loan to the value of an asset purchased) for buying an apartment will be expanded from 60 to 70 per cent.
• Corporate governance requirements will be introduced for commercial banks and microfinance organisations.

The NBG approved the rule of extending loans to individuals on January 1, 2019.