National Bank “actively promoting” establishment of “responsible lending principles” - Acting Governor

Natia Turnava, the Acting Governor of the National Bank of Georgia, on Friday told the Parliament the Bank was “actively promoting” establishment of “responsible lending principles” in the domestic market to protect consumers from “excessive debts”.

Turnava said the observance of the principle was “important” both in postponement and restructuring of the obligations and in “properly informing” the customers.

Commercial banks were given written instructions that in case no additional or amendment agreement is signed between the parties in the process of establishing the so-called grace period, detailed information on payments or a repayment schedule must be provided to consumers immediately in material or electronic form”, she told MPs.

She also noted the instructions were issued considering a “number of shortcomings” in informing consumers about establishment of grace periods for loans and credits issued by commercial banks, microfinance organisations and lending entities in response to “events developed as a result of the Covid-19 pandemic”.

Turnava also said consumers had not been informed in advance about the changed conditions of using grace periods, making it “difficult for them to make informed decisions”, and noted commercial banks must ensure receipt of payments according to the valid schedules before using the grace period.

She added the users would have the opportunity to request return to conditions from before the grace periods and previous payment schedules, and needed to apply to a “relevant servicing financial organisation” for the purpose.

The National Bank official also noted returning to the old schedules were “not the same as cancelling the loans”, and urged the public to “be more responsible” and provide “correct information” to pensioners and their families.

If such incorrect information was intentionally or unintentionally spread [...] we ask to make a clarification - it is again in the interest of our pensioners that returning to the old schedules does not mean cancelling the loans”, she added.

Turnava explained the process of returning to old payment schedules was a “mutual action” of the banks and the pensioners and added the banks were obliged to return accrued interest during loan postponement, while the borrowers were also required to return postponed money.