Kazakhstan to launch new mechanism for rehabilitation of borrowers soon
BAKU, Azerbaijan, April 1
The topic related to the regulation of the consumer lending segment and the containment of the debt burden of the population was discussed in the Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan, Trend reports citing Kazinform news agency.
Deputy chairman of the agency Nurlan Abdrakhmanov stressed that the policy in this sphere is aimed at preventing both banks and borrowers from taking excessive credit risks, reorienting banks to less risky loan categories and limiting the growth of the accumulated debt burden of the Kazakh people.
“The regulatory measures have been taken since January 1, 2020 in the form of a ban on the accrual of penalties and commissions on unsecured consumer loans and microcredits to prevent the growth of overdue debt,” Abdrakhmanov added.
“This applies to the citizens having overdue for more than 90 days,” deputy chairman of the agency added. “A ban was imposed on the provision of citizens with income below the subsistence level with loans to prevent excessive growth in consumer lending and protect the population from credit risks for unsecured loans.”
“At the same time, the agency set a debt burden ratio since 2020, which prohibits banks and microfinance organizations from issuing consumer loans to borrowers if their loan payments exceed 50 percent of the borrower's monthly income,” deputy chairman of the agency said.
“At the same time, banks and microfinance organizations will be required to assess the solvency of borrowers based on reliable data on income and property,” Abdrakhmanov said.
“Moreover, to discourage banks and microfinance organizations from aggressive issuance of consumer loans, the banks' equity capital adequacy ratios for consumer loans were increased in the form of a twofold increase in capital reserves from 150 percent to 300 percent," deputy chairman of the agency said.
“As a result of the taken measures, the risk "appetite" of banks decreased,” Abdrakhmanov said. “The load on equity capital on average for consumer loans increased from 140 percent to 150 percent, the number of borrowers receiving targeted social assistance decreased by 53 percent up to 112,000 people, the overall growth rate of consumer loans decreased up to 4.3 percent.”
"At the same time, the level of overdue debt over 90 days on consumer loans for the past year decreased up to 6.9 percent, while this figure was 8.6 percent in 2019,” deputy chairman of the agency said. “The lending volume to the population mainly increased through the mortgage loans, the volume of issuance of which for 2020 grew by 34.3 percent."
Abdrakhmanov also talked about a new rehabilitation mechanism developed by the agency.
“It envisages the assignment of the status of "rehabilitated" to the borrower if the loan overdue more than 90 days is repaid, but at the same time, the banking systems consider such citizens as high-risk ones, refusing to issue new loans,” deputy chairman of the agency said.
"The new rehabilitation mechanism envisages the assignment of the status of "rehabilitated" to the borrower in the system of credit bureaus,” Abdrakhmanov said. “This status will be the confirmation of the citizen's conscientious fulfillment of his/her obligations to the banks and other creditors.”
“No documents are required to obtain the status,” Abdrakhmanov said. “The procedure will be carried out by the credit bureau after 12 months after repayment of the overdue debt and if there is no other overdue debt during this period."
The deputy chairman of the agency also spoke about other categories of borrowers whose arrears have been repaid partially, rather than completely.
“The banks will carry out the individual work with each such borrower to assess his/her solvency for the further preparation of a rehabilitation plan with a more convenient repayment schedule,” Abdrakhmanov said.
“Accordingly, such borrowers may obtain the status of "rehabilitated" in case of the fulfillment of the rehabilitation plan and if there is no other overdue debt for the past 12 months,” the deputy chairman of the agency said.
“There is news for the category of borrowers who have not repaid their loans since they were received,” Abdrakhmanov said. “A new pre-trial procedure for the settlement of problem debts will be applied to them.”
“To speed up the settlement and reduce the burden on the courts, the agency has developed the legislative norms envisaging the introduction of a unified legal regime for pre-trial settlement,” the deputy chairman of the agency said.
“The banks will be required to conduct the individual work to assess the solvency of such borrowers and draw up a rehabilitation plan mutually acceptable for the lender and the borrower, containing an optimized debt burden and a new debt repayment schedule within the new procedure,” Abdrakhmanov said.
“The adoption of the legislative amendments will allow reducing the time for consideration of borrowers' applications and the settlement of their problem debts by two times - from 180 to 90 days," the deputy chairman of the agency said.