Less Income, Smaller Loan
By Levan Khutsishvili
Monday, October 29
“Implementation of this provision will restrict the activities of banks and also40-50% of those consumers who could get the loan, after this regulation, will not afford the loan. Besides, all the products can not fit into the new regulations and presumably, some specific directions will be suspended. In fact, some products will disappear from the market. For now, it is unclear which product will vanish because every bank will individually decide which loan to leave and which not. But it may not be easy for banks and other credit organizations to make some effort on small loans. Accordingly, it is possible that there will be no quick loans, " – said Dzneladze.
According to him, it is not excluded that at the first stage, for a certain period, loans price will be increased. According to AleksanderDzneladze, if this provision comes into force, consumer loans portfolio will be reduced by 30% and mortgage loans by 3-4%.
New regulations that will go in force from November 1, directly address to the mortgage loans. If a person who has no more than one residence wants to get a mortgage loan he or she will not be allowed to do it ,as according to the new regulation mortgagor should have more than one residence, if not, than co-mortgagor should own more than one immovable property and at the same time, property that mortgagor/co-mortgagor uses for housing is not guaranteed for already exciting mortgage loan.
Changes will appear regarding the limits and coefficients of loans, as well as conditions of giving the loan. A person with the 1000-dollar income per month will get only that amount of money as a loan when that person will need to pay a maximum 200 GEL per month. At the same time person can get a mortgage loan for maximum15 years, consumer loans secured by immovable property - 10 years, in case of transport loan - 6 years, for the rest of the loans for maximum amount - 4 years.
And regulation document says that ratios will increase in parallel to the user's income. For example, the maximal coefficient of loan service for the person having from 1 000 to 3,000 GEL income –should be 25%; In case of income of 3 000-5000 GEL - 30%; Within 5 000-7 000 GEL - 40%; In case of monthly income from 7,000 to 10 thousand GEL - 50%.
What will change regulations? In the long-term period, it should reduce the dependence of citizens on banks, as According to the report of the International Monetary Fund, Georgia ranks second in the world with the banking indebted population. For every 1,000 people, 676 people have a bank debt (2015).
Based on the data’s from 2013 IMF was concerned that every third borrower in Georgia paid more than half of its income to the bank's debt service on a monthly basis. Today this figure will be much higher.
According to the international standards, Loan repayment schedule for physical persons should be distributed so that the citizen does not pay more than 30% of his personal income to cover the loan on a monthly basis. For loans issued in foreign currency, this limit should be no more than 20%. New regulations attempt to implement international standards in Bank sector.