The National Bank of Georgia has approved the regulation on responsible lending to natural persons

The National Bank of Georgia has approved the regulation on responsible lending to natural persons

24 December, 2018
The National Bank of Georgia has adopted the regulation on responsible lending to natural persons. The regulation aims to support the stability of Georgia’s financial system and facilitates sound lending, which in turn contributes to sustainable development of the economy. According to the main principle of the regulation a financial institution shall not issue a loan or impose other financial liability on a consumer (e.g. guarantee) without solvency analysis of a borrower. This principle is one of the requirements set by relevant EU Directives [1][2] and is based on the best international practice.

The regulation shall apply to all lending organizations under the supervision of the National Bank. In order to issue a loan a lending organization will be required to assess the borrower’s income and the value of a collateral, and shall issue a loan for which Payment to Income (PTI) and Loan to Value (LTV) ratios do not exceed the thresholds defined by the regulation. (Table 1, 2). Those thresholds are different for domestic and foreign currency loans in order to protect a borrower and the financial system against the risks stemming from exchange rate fluctuations.

The draft of the regulation has been available for discussions since July 2018: the draft was published on the website of the National Bank of Georgia, and intensive meetings were held with representatives of the financial sector and international organizations. The views expressed during the consultation process were reflected in the final version of the document. The present Decree shall come into force for all entities on January 1, 2019.

Similar regulations have recently been introduced in several European countries (such as Hungary, Sweden, Denmark, Lithuania, Czech Republic, Estonia, etc.).

Frequently asked questions regarding the regulation and the regulation itself can be found on the links below (available only in Georgian).
Table 1. Maximum Payment to Income Ratios

Monthly Net
Income in GEL

For non-hedged borrower
in case of maximum/contractual maturity   
For hedged borrowers
in case of maximum/contractual maturity
 <1,000  20% / 25%  25% / 35%
 >=1,000-2,000<  35% / 45%
 >=2,000-4,000<  25% / 30%  45% / 55%
 >=4,000  30% / 35%  50% / 60%

Note: Payment to income ratio (PTI) for maximum term is calculated as annuity payments for the maximum
period defined by the regulation.


Table 2. Maximum Loan to Value Ratios

Maximum loan to value ratio (LTV) for GEL loans


Maximum loan to value ratio (LTV) for foreign currency loans