Azerbaijan shores up banks dealing with short-term loan problem
By Fatma Babayeva
Azerbaijan’s government has made significant changes in terms of the loan issuance by the banking sector of the country over the last year, said the chairman of the Financial Market Supervisory Body Rufat Aslanli on May 10.
The move aims to support the banks that encounter problem with short-term loans.
The FMSB has developed a separate program over the regulation of bad loans in the banking sector of Azerbaijan, the chairman said.
If the banks encounter the problem over the payment of the short-term loans on behalf of the borrowers, the supervisory body will take it into account, and the government plans to provide assistance to those banks with liquidity issue as well, said the chairman.
Earlier, interest rates and duration of loans have been amended by the banks of Azerbaijan - after the devaluation of the national currency, the banks have made concessions to their clients over the interest rates and increased the maturity period of the credits, said Aslanli by adding the possibility that with the formation of additional resources the banks will be able to offer additional benefits to its customers.
Earlier Aslanly said that the problem with the loans issued in dollars should be solved on the basis of a mutual agreement between the banks and customers.
Moreover, it is not easy to classify borrowers into the categories who do not want and who cannot pay back loans, he said. Offering discounts to those barrowers encourages them, whilst the borrowers of the loans in foreign currencies are “punished” to repay with the new exchange rate.
According to the data provided by the Central Bank of Azerbaijan, the credit portfolio of banks amounted to 19.69 billion manat or $13billion in the first quarter of 2016. More than half or 50.9 percent of these loans were issued in the national currency, the rest or 49.1 percent in foreign currency.
Furthermore, the volume of the outdated loans and loans in the loan portfolio amounted to 1.33 million manat or $884,000 by the end of the first quarter of 2016 which is by 10 percent more compared to the corresponding period of the previous year. In other words, its share stood at 6.75 percent in the loan portfolio of the banks which is by 0.88 percent more than the indicators of January-March of 2015.
The amount of the short-term bad loans for this period stood at 456.8 million manat or $304 million in the total volume of short-term loan portfolio amounting to 4.48 billion manat or $3 billion.
The CBA issued 1 billion manat or $665,000 to the bank system of the country in total throughout its operation, Head of the bank Elman Rustamov told on May 10.
Most of those loans were allocated to the implementation of various social projects, development of infrastructure and other activities. Rustamov said the swap operations are not included in the given volume.
Recently, Azerbaijan has implemented the consolidation plan for its banks in an effort to stabilize the banking system. This policy of the country is also supported by many international finance institutions such as WB, IFC, and EBRD.
In addition, six banks of the country were closed since the beginning of 2016. Currently, 37 banks operate in Azerbaijan. Recently, the Banks Association of the country appealed the FMSB for three years tax holiday for the part of their incomes to be directed to the capitalization.
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Fatma Babayeva is AzerNews’ staff journalist, follow her on Twitter: @Fatma_Babayeva
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