New Regulations on Loans to Take Effect from January
By Tea Mariamidze
Friday, November 16
The new regulations on issuing loans, which had to take effect on November 15, will enter into force from January 1st, 2019.
The National Bank of Georgia (NBG) has for the second time postponed the regulations, which initially were to start on November 1st.
The NBG has not given explanations about the reasons for the postponement yet.
The changes became necessary after it was revealed that debts of individual households have been growing and additionally, the practice of crediting physical bodies with higher loan liabilities has also been increasing.
The decree was issued by the Head of the NBG, Koba Gvenetadze and the project reads that the maximum amount of loan coefficient will be determined by the monthly income of the client.
The initiated changes mean that from the next year the banks will be allowed to give their clients loans only after studying their solvency.
The regulations apply to all entrepreneurial entities where more than 20 individuals have a loan or credit obligations.
In the case of 500-GEL income, the maximum lending rate of the loan service should not exceed 15%. In the case of a consumer loan, if a person has a monthly salary of 500 GEL, he/she will not be given a loan which will be more than 75 GEL per month. In the case of a salary of up to 1000 GEL, the loan burden will be 20%.
With the increase in revenue, the loan burden will be distributed as follows:
1000-2000 GEL - 25%
2000-4000 GEL - 30%
4000-8000 GEL - 35%
5000-7000 GEL - 40%
According to the provisions of the regulations, rules for lending by guaranteeing real estate will also be tightened. In particular, such a loan is issued if the borrower owns more than one residential property and, at the same time, these properties are not on the lease.
The current edition of the regulations reads that the maximum term of the mortgage loan is 15 years. Also, consumer loans secured by the real estate will be maximum 10 years and any other type of loans can be issued for a maximum 4 year period.