National Bank to reduce consumer imports
A ban on issuing loans without an income certificate will reduce the volume of bad loans and consumer imports – since immediately available loans motivate people to make unplanned purchases. The next step might be a return to concessional lending for domestic goods in order to unload industrial warehouses.
As of April 26th, a ban on loans issued without an income certificate took effect.
Previously, consumer loans did not require any additional bureaucracy in order to speed up consumption. Consumer loans were issued upon presentation of a passport, hence the high interest rates on such loans. In 2013, before the restrictions on consumer loans’ maximum interest rates were introduced (at 47 % per annum), final interest rates could exceed 100 % per annum. As a result, the volume of overdue consumer loans tripled in 2013.
On April 18th, 2014, the National Bank adopted a resolution introducing an additional requirement for assessing consumer’s creditability when issuing consumer loans – he or she would have to present a certificate of income. This new procedure will have sustained consequences for the retail and banking markets. Banks specialising in consumer loans will lose some profits. Their branch offices in large department stores will be restructured or closed down, leading to staff reshuffles and lay-offs. Retailers will lose some sales proceeds and will curtail imports of some consumer goods.
The new regulation is yet another attempt of the government to reduce consumer imports. The next step might be a return to concessional lending for domestic goods in order to unload industrial warehouses. Around 60,000 washing machines, 236,000 refrigerators and freezers, and 8000 TV sets are languishing in warehouses. If enterprises manage to clear up their warehouses, their financial health will improve considerably, settlements in the economy will normalise and production volumes will increase.
The National Bank’s new measure will kill two birds with one stone: it will reduce consumer imports and decrease the number of bad loans in the economy. In addition, other measures are expected to stimulate public demand for domestic products, such as concessional loans and restriction on the range of foreign products on the shelves.