Azernews.Az

Azerbaijan`s banks have resumed the disbursal of loans that were discontinued in September. Moreover, banks have pledged not to raise interest rates.
The central bank`s measure to lower mandatory hedging on bank liabilities from 12% to 9% and to eliminate a 5% mandatory hedging on external liabilities beginning November 3, has boosted activity in the domestic debt market. The measure aimed to increase the liquidity of local banks, experts said.
A majority of local banks explained last month`s suspension in the allocation of loans, in particular, of consumer credits, as being due to a shortage of cash. By reducing the requirement on hedge funds, the National Bank of Azerbaijan (NBA) provided local banks with access to additional resources. As a result of the measure, banks will acquire an extra 200 million manats ($246 million), which will be used to meet their obligations and to allocate loans. Bank officials predict a major revitalization in the country`s crediting market beginning in November. Experts note, however, that although consumer lending has resumed, its scope will be rather limited compared to previous lending practices. Local banks are unlikely to lend money to low-income and risky clients in an effort to increase the quality of their credit portfolios, they say.
The fact that banks discontinued the allocations shortly before the country`s October 15 presidential election had sparked a slew of controversial statements. Some analysts claimed the suspension of loan allocations sought to prevent opposition forces` attempts to raise large quantities of funds and, subsequently, use them for election campaigning.
Economics experts, in turn, explained the suspension by the adverse impact of the global financial crisis, saying the woes in world markets have affected Azerbaijan, leading to a reduction of cash stocks in local banks.
Earlier, the Economic Development Ministry announced it was taking preventive measures to alleviate the impact of the global crisis on the domestic economy. It said the restrictions on credit allocations were part of the overall effort to minimize this impact by ensuring the financial stability of Azerbaijan`s banking system and warding off outside risks.
The NBA`s measure, which went into effect on October 14, also lowered annual interest rates on loans from 15% to 12%.
Observers recall that the NBA had raised interest rates this year from 13% to 14%, and, further, to 15%.