The National Bank of Georgia (NBG) has expanded restrictions on foreign currency lending, requiring lending organizations to issue loans of up to 1 million GEL only in the national currency.
The decision, published in the Legislative Herald of Georgia, extends to lending organizations a restriction that the NBG had already imposed on commercial banks on May 6.
Under the previous rules, unhedged borrowers could obtain foreign currency loans of up to 750,000 GEL. The new regulation increases that threshold to 1 million GEL.
The NBG states that loans and bank credits of up to 1 million GEL must be issued only in GEL. Borrowers must also have sufficient income in the same currency as the loan to fully service their obligations.
The regulation specifies that income will be considered to be in the loan currency if its source is not sensitive to exchange-rate fluctuations and is linked to a country where the loan currency is the national currency. For business loans, lending organizations must ensure that debt-service ratios established by their internal policies are fully maintained using income received in the loan currency.
The move continues the National Bank’s policy of reducing dollarization and limiting foreign exchange risks for borrowers whose income is primarily denominated in GEL.
