Baku, Azerbaijan, March 1
By Azad Hasanli – Trend:
Azerbaijani President Ilham Aliyev on Feb. 28 signed a decree on additional measures in connection with the resolution of the issue of problem loans of individuals in the country.
This revolutionary decree, aimed at improving the welfare of the population, is an important element of the social package. That’s because the solution of the problem of credit debts of the population won’t only ease the financial burden, but also restore confidence in the banking sector and free debtors from legal proceedings.
It is assumed that the decree will cover more than 800,000 individuals. Several main points need to be highlighted here:
1) The first part of the decree applies to individuals who suffered due to the devaluation of the manat in February and December 2015. These citizens will be able to receive compensation from the government.
For example, an individual in the period until Feb. 21, 2015 received a loan worth up to $10,000. Before the first devaluation the loan amount was 7,800 manats. After the devaluation, when 1 US dollar became equal to 1.05 manats, the loan amount reached 10,500 manats. As a result, the loan burden increased by 2,700 manats. In accordance with the decree, a citizen will receive namely this amount of 2,700 manats as compensation. If at the time when the decree comes into force the loan remains unpaid, the government will pay this difference to the bank.
The same applies to loans received until Dec. 21, 2015 (second devaluation). In this case, a citizen is compensated for the difference between 7,800 manats and 15,500 manats.
2) The second part of the decree applies to all loans with delay of more than 360 days, taken after Jan. 1, 2012 in the amount of up to $10,000 or 17,000 manats. That is, the second part of the decree by the Azerbaijani president applies to both US dollar and manat loans. When restructuring loans in foreign currency, they will be converted into manat loans.
In this case, for the restructuring of these debts, banks are recommended to conclude a new loan agreement on preferential terms. The following conditions are proposed: a contract is concluded for a period of five years (with a one year delay in repayment of the principal debt on a loan) and an annual interest rate of one percent. In this case, all fines, interest charges and loan pennies will be written off.
3) The decree applies both to loans taken from banks and non-bank credit organizations. Credit unions are an exception.
4) If there are legal proceedings between banks and borrowers or even decisions adopted for execution, all of them will be withdrawn.
5) If a loan was taken after 2012, but repaid before 2015, no compensation is provided.
Azad Hasanli - Head of Russian News Service at Trend News Agency