BAKU, Azerbaijan, April 23. The recent rise in interest rates on loans is mainly linked to an increase in market rates, which in turn stems from liquidity conditions, said Taleh Kazimov, Governor of the Central Bank of Azerbaijan (CBA), Trend reports.
Speaking at today’s press conference on the parameters of the interest rate corridor, Kazimov explained that the accumulation of funds in government accounts is leading to a decrease in market liquidity.
“In a low-liquidity environment, interest rates naturally go up.
Every manat in the system holds value. If someone keeps money at home and potentially loses 9-10 percent of its value annually, depositing it in a bank instead allows them to earn rather than lose,” he said.
According to the CBA Governor, banks are raising deposit rates to attract these funds.
“Large banks offer deposit rates around 5-6 percent, while smaller ones go as high as 8-9 percent. As we began implementing our monetary policy, competition among banks increased. As a result, the number of unique depositors grew by 41 percent last year, with 77 percent of them holding deposits up to 30,00.
Even in this environment of higher rates, our lending is not slowing down. On an annual basis, our loan portfolio is growing by between 18.5-18.7 percent. Business loans have increased by over 17 percent, and consumer loans by more than 20 percent. Lending is ongoing. We’ve used this opportunity to foster competition among banks and help shape the value of the manat in the market,” he emphasized.
Kazimov also addressed bank profitability.
“Banks are currently operating with very high margins—around 6-8 percent. It would be more efficient for them to work with larger volumes at lower margins.”
The CBA does not anticipate further increases in interest rates. We expect banks to manage their margins more effectively, as we believe they are already sufficiently high,” he said.
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