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toward financial discipline. The total amount of these loans must not exceed 25% of the supervisory capital of commercial banks. Also, the total amount of loans guaranteed by real estate must not exceed 15% of the bank’s supervisory capital without an analysis of client solvency, while the loan to value ratio must not exceed 50% when issuing a loan
8.1.3 NPLs
8.1.4 Banks specific issues, regulation
Georgian banks have weathered the depreciation well, with non-performing loans (NPLs) at a manageable rate of 2.6% of total loan portfolio at end-2018 , compared with a ratio of 3.4% at end-2016, according to the National Bank of Georgia. NPLs account for around 3% of total lending. Banks are well capitalised and positioned to absorb a moderate deterioration in their loan portfolios, according to Fitch ratings agency.
Georgia’s FinMin advocates for softer lending regulations
Georgia’s Finance Minister Ivane Machavariani said that the National Bank of Georgia (NBG) should revise the recently imposed banking regulations which tightened the process of issuing loans, Georgia Today reported .
The call seems to be prompted by concerns related to country’s economic growth. The World Bank on April 5 revised downward its forecast for Georgia’s GDP growth this year to 4.6%, down from 5% projected in January this year. Bankers’ association warned of the tighter regulations’ impact on growth.
“I hope that the National Bank will revise these regulations if necessary. It’s a bit early to assess the effects of these regulations , but its effect on the construction sector, for example, is easy to see,” he said, adding the regulations should be softened as much as possible.
Last week, Georgia’s Minister of Economy and Sustainable Development Giorgi Kobulia expressed a different view: he said that the government is not going to soften the banking regulations, according to which banks are not allowed to give their clients loans without studying their solvency.
"These regulations are adequate and serve to protect the people from taking loans without realizing the possible consequences,” he stated.
The new banking regulations took effect in Georgia on January 1, 2019 meaning that people will not get loans from banks if there are no solid guarantees that they will be able to pay it back on time.
8.1.5 SMEs finance
Georgia launches loan guarantee programme to help SMEs
Georgia’s government says it will facilitate better access to finance for small and medium sized enterprises (SMEs) with a new credit guarantee programme that came into force on April 1.
“This year, GEL20mn (€7.4mn) has been allocated from the state budget and we hope the banks will issue loans worth about GEL250mn (€92.6mn) for small and medium sized businesses”, said Economy Minister Giorgi Kobulia.
31 GEORGIA Country Report July 2019 www.intellinews.com