Azernews.Az

Leman Mammadova

Ninety percent of compensation payments on problem bank loans have already been made, said Ibrahim Alishov, Acting Chairman of the Executive Board of the Financial Market Supervisory Authority of Azerbaijan (FIMSA).

After the completion of this process, the restructuring of problem loans in Azerbaijan will accelerate, he added.

“The restructuring process affects only the bank-customer relationship, so it is carried out after discussions between the bank and customers,” he noted, adding that this process will accelerate after the compensation process is completed.

He noted that the amount of compensation for 19,000 individuals is less than 500 manats ($293). As many as 6,000 people did not take their cards in Azerpost yet. The amount of compensation is less than 20-50 manats ($12-29) for a large number of citizens, said Alishov.

He added that if citizens do not collect their compensation before the end of the year, they will have to ask the banks to extend the validity of card due to the expiration of the card use period.

The restructuring process is carried out in parallel with the payment of compensation as part of the execution of the presidential decree on problem loans. As a result of the restructuring, new loans are issued on very favorable terms - for five years and at a rate of 1 percent per annum. Totally, 300,000 citizens will be able to take advantage of this.

Earlier, Azerbaijani President Ilham Aliyev signed a decree on additional measures in connection with solving the issue of the individuals’ problem loans. The decree envisages the payment of compensation to citizens whose loan burden increased as a result of the devaluation of the manat in February and December 2015.

The decree aimed at improving the welfare of the population is an important element of the social policy. That’s because the solution of the problem of credit loans of the population won’t only ease the financial burden, but will also restore confidence in the banking sector and free some debtors from legal proceedings.

The decree applies both to loans taken from banks and non-bank credit organizations. Credit unions are an exception.

According to the decree, opportunities are created for restructuring on concessional terms of both US dollar loans and manat loans with a delay of more than 360 days. If the amount of compensation exceeds 500 manats, these funds will be transferred to the account of the individual; if less, the payment will be made via money transfer.

In addition, banks will receive preferential loans under a state guarantee in the amount of up to 682 million manats as part of the decree. In order to prevent deterioration of the currency position of banks, they will also be provided with securities worth up to 215 million manats ($126.5 million) with an annual interest rate of 0.5 percent for the allocated loan.

The decree also covers loans in rubles and euros. Loans in euros and rubles will be converted into US dollars at the rate of the Central Bank for February 21 and December 21, 2015. Compensation will be issued in manats, regardless of the currency which the loan was taken in.

As of mid-May, Azerbaijan’s Finance Ministry allocated 430.6 million manats ($253 million) to pay compensation on problem loans to individuals. It is expected that 602,347 people will receive compensation. All payments are due to be completed in May 2019.

The payment of compensations for problem loans to individuals in Azerbaijan began on April 22. The payments are made through branches of banks and Azerpost postal operator.

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Leman Mammadova is AzerNews’ staff journalist, follow her on Twitter: @leman_888

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