According to IMF Against the background of high credit growth, the authorities introduced regulations to limit household over-indebtedness. The maximum effective lending rate was reduced to 50 percent (from 100 percent) to limit predatory lending. Since May, a limit_ to banks’ lending to households without verifiable income (25 percent of banks regulatory capital) slowed growth in consumer lending. In turn, mortgage lending, mostly in FX, picked up as interest rates declined. As of September, private credit growth (at constant exchange rates) remained at 20 percent y/y). Credit by micro-financial institutions (MFIs) increased by 20 percent (y/y)
in 2018Q2. Above-trend growth in the credit-to-GDP ratio has increased the loan-to-deposit ratio. On November 19, the private Cartu Foundation offered to purchase all loans below GEL2, 000 that have been in distress for at least one year, to forgive debt to about 600,000 households. The authorities indicated that the impact on financial institutions would be negligible, notes IMF.
Source: IMF Country report
