Banking

Larization Policy Makes Mortgage rates costlier

Larization Policy Makes Mortgage rates costlier April 23, 2018Leave a comment
2017120574.jpg

According to your February indicators of National Bank of Georgia (NBG), interest on GEL-denominated loans rose by 2.8% to twenty.9%, including 11.9% GEL-denominated loans are accessible for legal entities, while physical bodies need to pay 24% interest rate for GEL-denominated loans.

It needs to be noted an upswing of GEL-denominated loans in value was preceded by Government\’s Larization initiative. Under this initiative, loans of around 100 000 GEL are issued only in? national currency. This ensures that consumers\’ option was restricted? and so they usually takes loans of around 100 000 GEL only in national currency. Meanwhile, apr of foreign exchange denominated loans decreased by 0.3%. This means costlier GEL-denominated loan is usually an only decision for bank clients. Businessmen have? already expressed discontent with loans risen in value. Businessman Tsezar Chocheli says that high interest rates set by commercial banks frustrate business process and plenty of important projects. \”Production of ceramics, concentrates and aethereal oils was suspended. Interest rates have become high and production cannot withstand them\”, Tsezar Chocheli said.

Vakhtang Khomizurashvili, expert of investments, also references excessive charges. Current mortgage rates have led business sector to the blind alley, he was quoted saying.

\”If borrowers use loans? for buying fixed assets, naturally, this would aggravate situation in business sector, because commercial banks demand guarantees, for starters. Relating to loan rates,? despite commercial banks set grace periods, clients must pay interest levels at any rate. Home interest rates impose heavy burden on any organization, specifically agriculture sector, much more sector requires preferential conditions. This sector comprises high risks and it also swallows a while to take delivery of profits. Consequently, this industry requires individual approaches. In general, any country pays special care about agriculture sector. In respect of importers, this factor can make less affect them, simply because they possess a short-period cycle. The typical picture shows that today the business enterprise sector has come to blind alley, in practice\”, Khomizurashvili said.

The expert in addition has brought up problem solution ways and noticed that continuing development of securities sector is one of the better ways in this way.

\”In this example, everything is affixed to fx rate. National Bank should first make foreign currency mechanism more transparent. The prevailing system really should be completely replaced. Foreign currency hedging mechanism should be introduced whilst companies manage to insure forex rate. The region should look after upgrading investment and corporate culture and education. Business need to be launched not by loans, but partnership capital. Seeking of other causes of investments is vitally important issue. I mean securities market. If companies start issuing securities and attracting investment resources from abroad, naturally, consideration in loans will decline and banks will need to lower interest rates\”, Khomizurashvili said.

Bank sector expert Gocha Tutberidze declared that business may very well be developed under any interest rate.

\”Naturally, low interest rates are appropriate for business, however this also comprises certain risks. We dream about low interest rates, but there are high risks in Georgia

Leave a Reply

Your email address will not be published. Required fields are marked *