Azerbaijani Banks again Suspend Consumer Lending

Azerbaijan, Baku, 1 December / Trend corr. N.Ismayilova, I.Khalilova/ Azerbaijani banks again suspended consumer lending, banks said to Trend on 1 December. Almost all banks will resume lending not sooner than next year.

Trend surveyed Rabita Bank, Nikoil Bank, Royal Bank of Baku, Azerbaijan Senaye Bank, Royal Bank of Baku, Atabank, Parabank, Bank of Azerbaijan, Bank Respublika, UniBank, and Azerdemiryolbank.

Nikoil Bank issues consumer loans not exceeding AZN 3,000 under realty (flat) pawn and issues business loans. The bank said the time to resume issuing of small loans has not yet been specified.

UniBank slowed down consumer lending, cutting issuing of new loans by 80% from late August.

Other banks said that loan lending had been suspended and it is unknown when it would be resumed. However, bank representatives say lending may be resumed not sooner than next year.

Banks show excessive crediting prudence while there is excessive liquidity of about AZN 1.9bln in the banking system, or 23% of aggregated bank assets.

The actions of the National Bank of Azerbaijan (NBA) to soften the money policy, which provided additional liquidity of AZN 340mln, have not lead to increase of credit operations as well.

Under the decision of NBA administration, refinancing rate was cut from 14 October in three stages from 15% to 8% interest rate, the up limit of interest corridor - from 19% to 13%, and down limit - from 5% to 1%. Norms of compulsory reservation on bank obligations both in national and foreign currency were cut from 12% to 6%, and norms of compulsory reservation on external liabilities - from 5% to 0%.

"Reduction of interest rate contributed to stabilization of average rate on bank market and increase in interest rates is no longer observed, whereas growth of average credit rate totalled 1-1.2% from the beginning of 2008 to September 2008", said Khagani Abdullayev, the Director General of NBA.

The current average credit rate is 18.2%.

According to Abdullayev, reduction of compulsory reservation norms by 1% brings additional liquidity of AZN 40mln to the banking sector. Accordingly, 6% decrease ensured additional AZN 240mln to the system.

In addition, cancellation of compulsory reservation norms on external liabilities brought liquidity of AZN 100mln to the banking system.

In spite of NBA's actions to increase liquidity in the banking system, to reduce bank loaning can be explained only by correction of business plans. According to bank experts, this is completely objective, for twenty banks drew external borrowing of approximately more than $2bln over the last two years.

At present, given the global crisis which accelerates recovery of means (some foreign banks inquire recovery of means in advance), Azerbaijani banks have to save funds and launch activities on new terms beginning from 2009.

On 1 December, official exchange rate totalled AZN/USD 0.8088.

The correspondent can be contacted at

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