Loan Annulment Process Prolonged until Mid-January

The program of loan annulment of black-listed bank debtors is ongoing successfully but the process has been prolonged until January 15.

Starting on December 15, 2018, the Government of Georgia began annulling the debts of over 600,000 citizens,150,000 of whom are socially vulnerable, whose loans at banks do not exceed 2000 GEL ($748).

Cartu Foundation, established by the Founder and Chair of the ruling Georgian Dream Bidzina Ivanishvili, agreed to take the full responsibility of paying the debts of those 600,000 people on the financial black list.

The information about extending the program dates was released by Georgian Minister of Finance Ivane Matchavariani and was confirmed by the Head of the Association of Banks, Alexander Dzneladze.

Dzneladze said the banking sector has completed the process of making lists, adding the names of people whose debts will be annulled and have been uploaded to the website of the program -

"Every bank is participating in the program. There is talk about microfinance organizations, which are many, this is why the process has been prolonged until January 15th,” he explained.

The Head of the Association of Banks also stated that problematic credit portfolios have already been transferred from the banking sector to Cartu Foundation and the annulment process is ongoing.

"Debtors can go on the website and see if the data on their loans has been uploaded. If it has, it means that they no longer have a debt,” he said.

Dzneladze also commented on the new loan issuing regulations at Georgian banks which took effect from January 1.

He says that January will be a tough month for the banking sector as it adapts to the changes.

“Issuing of loans will be significantly reduced. The old format no longer exists when a customer can go to a bank and get a loan based on their ID card alone. According to the new regulations, only people who have an income will get loans,” he explained.

The regulations introduced by the National Bank of Georgia (NBG) envisage that the maximum amount of loan coefficient will be determined by the monthly income of the client.

This means that banks will be allowed to give 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.

New rules for lending by guaranteeing real estate have also been tightened. In particular, such a loan is issued if the borrower owns more than one residential property and, at the same time, those properties are not on lease.

The current version of the regulations reads that the maximum term of a mortgage is 15 years. Under the changes, consumer loans secured by real estate have become a maximum 10 years and any other type of loan can be issued for a maximum 4-year period.

By Thea Morrison

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07 January 2019 12:05