Central bank: Increased demand for loans in Azerbaijan hinders process of rate reduction

Business Materials 14 November 2013 18:10 (UTC +04:00)

Baku, Azerbaijan, Nov. 14

By Emin Aliyev - Trend:

The interest rates on loans must be thoroughly examined in Azerbaijan, chairman of the Central Bank of Azerbaijan (CBA) Elman Rustamov said while discussing the draft state budget for 2014 in the parliament today.

"Azerbaijani banks' credit portfolio exceeds 14 billion manat," Rustamov said. "More than a third of this amount falls to consumer loans with a rate of 15 to 30 percent. The remaining two- thirds fall to business loans. Their rate fell by five per cent to 14 percent per annum. I would like to stress that the central bank considers these figures high."

According to Rustamov, the Azerbaijani banks' profitability is 15 percent.

"But this does not make loan rates unreasonably high," he said. "We live in terms of market economy and the interest rate is governed by the relations between the bank and the client. We will hold a meeting with representatives of the country's banks soon and discuss the interest rate decrease."

Rustamov urged the banking sector to promote social responsibility.

"Moreover, we established a special body protecting the rights of consumers of banking services, controlling the activity of the banks," Rustamov said. "It also calls them for providing all customers with information about the actual annual interest rate, which includes the cost of loan servicing in percent for the borrowers to have full information about a loan."

According to Rustamov, the prevalence of demand for credit over the supply also affects the rate decline.

"There is great demand for money in the country's economy," Rustamov said. "Using money for cash payments instead of accumulation or investment is the main reason for the lack of credit resources. Thus, the further development of non-cash payments in Azerbaijan can contribute to the solution of this problem. This is one of the main goals for the future."

The official exchange rate is 0.7843 AZN/USD on Nov. 14.