Banking
Posted: 2 weeks ago

Will Commercial Banks Extend Grace Period?!

The 3-month grace period will expire in several weeks. It is interesting how commercial banks will treat both corporate and retail loans, because many businesses failed to return to ordinary working regime in the crisis period and to receive incomes for serving loan liabilities.

As noted by Aleksandre Dzneladze, head of the Banking Association of Georgia, the banking sector does not plan to extend the grace period, however, certain loans will be restructured in individual regime.

“Naturally, the grace period will not be extended in the same way; however, commercial banks are collecting specific information. Today, we face real challenges and we should understand that commercial banks should provide certain preferences anyway.

Commercial banks have been working with business companies in individual regime to determine the restructuring conditions”, Dzneladze noted.

As for physical bodies, the same policy will be carried out for retail loans too.

„Physical bodies should also apply to commercial banks”, he added.

The Association does not have specific statistics on how many legal and physical bodies have used the 3-month grace period. Business companies continue negotiations with commercial banks on restructuring loans, he added.

As for expected liquidity problems in the banking sector, Dzneladze explained:

‘Today the Georgian banking sector has no liquidity problems and commercial banks hold enough currency reserves, however, amid the existing challenges, GEL liquidity has shrunk because of several reasons: grace period, including the central bank’s interventions that ejected 300 million GEL from the system. Furthermore, the spending structure of the Treasury and companies have also changed; money mass has also increased by about 700 million GEL. This signifies that the Treasury has increased expenditures, translocated its resources from commercial banks to the Treasury. As a result, the GEL mass shrank at commercial banks, however, I would not say this is the key problem. Nonetheless, these decisions have raised the interest rates of GEL-denominated loans by ¾ compared to December 2019”, Dzneladze noted and added that specific preferences for clients will be determined in several days.