The National Bank of Georgia is considering the possibility of changing the articles in the loan agreements signed with the customers by the commercial banks, by which these loans are tied to the refinancing rate. Instead, variable rate loans might be tied to another base index, although the National Bank has not made a clear decision on what this index will be.
MP Roman Gotsiridze asked Koba Gvenetadze a question about the loans to tie to another index instead of the refinancing rate. According to him, it is important for the NBG to study the international experience of what alternatives exist instead of the refinancing rate, in terms of tying loans to other indexes or rates.
According to Koba Gvenetadze, the National Bank is currently investigating these issues and the financial stability committee has already discussed this change. Koba Gvenetadze also notes that the alternative index to which variable rate loans can be tied will also be linked to the refinancing rate.
"Sir, Roman, you somewhat guess what we are going to do, and we had a discussion of this issue at the Financial Stability Committee and what is the practice of floating interest rates in other countries. We've done a lot of research and now we're at a stage where we decide which index is best to tie to in this case and then mandate the banks to take advantage of that.
The National Bank makes many unpopular decisions; You have also been in this position. We have seen this experience and in a certain period we will decide in what form to offer it to society and the financial sector", said Koba Gvenetadze.
From March 30, 2022, the refinancing rate in Georgia increased by 0.5 percentage points to 11%. This increase was caused by inflation in the country, which increased to 13%.
So far, it is not known to which index the variable rate loan can be tied. This could be the Tbilisi interbank interest rate TIBR, which is also 11% and is actually built on the refinancing rate multiplier.
Currently, 190,000 variable rate loans are tied to the refinancing rate in Georgia, the portfolio of these credits amounts to USD 8.8 billion. Among them are 70,000 loans secured by real estate. The volume of these loans is GEL 3 billion.
