“Low-income citizens will find it harder to take out loans because the percentage of their income that they are allowed to allocate toward loan repayment is being reduced. This should be understood as the National Bank saying that people are foolish, that they do not have enough knowledge to avoid taking out a loan they cannot afford to repay, while the National Bank is both an adviser and, at the same time, a prohibitor,” former National Bank President Roman Gotsiridze told Interpressnews, responding to the tightening of the rules for issuing loans to individuals.

According to him, the National Bank should have left the regulation at its original threshold, when the 25% debt-service ratio requirement applied to individuals earning up to GEL 1,500, because, Gotsiridze explained, this is the threshold up to which the National Bank should intervene in a family’s financial planning.

“Under the National Bank’s new regulation, a person with a low income will be able to take out only a small loan. This rule was already in effect and is now being made even stricter. On the one hand, this should be understood as saying that people are foolish, that they do not have enough knowledge to avoid taking out excessive loans or loans they cannot afford to repay, and that the National Bank is an adviser, but not merely an adviser - it is also a prohibitor. It tells you that you do not have enough mental capacity to calculate your own risks, and that it is acting according to humanitarian principles because if you take out this much of a loan and spend half of your salary repaying it, the other half will not be enough for your children and your family. That is roughly the financial and humanitarian explanation behind it. This deprives a person of the freedom to choose and the ability to independently assess risks.

“On the other hand, if we approach the issue from the perspective that many people not only cannot assess the weight of their credit risk, but even trust a computer-generated person named Henry Jones, the financial pyramid that has now gone bankrupt - many people think this Henry Jones is a real person and tell him, ‘Mr. Henry, you are so full of wisdom; when are you coming to Georgia? We should invite you to khachapuri and hazelnut picking.’ As a result, our citizens have lost tens of millions of lari. So, it is a matter of debate what scale of regulation the state should generally apply, and this does not concern only the issue of credit,” Roman Gotsiridze said.

At the same time, he said he considered it unjustified to cite higher wages as a reason for the need for the changes, arguing that the National Bank had overlooked the fact that prices had at least doubled alongside the increase in incomes.

“One of the National Bank’s arguments is that wages have increased and, therefore, limiting this ratio to this extent will not be as burdensome for families. But the National Bank forgets that as wages have increased, prices have also increased. An increase in income does not mean an increase in prosperity. During the Georgian Dream’s rule, according to official statistics, prices have doubled, but we know very well that official statistics are lying, because almost every statistical indicator is used for political purposes, including even the population census. For example, the number of foreign citizens in Georgia has been artificially reduced so as not to provoke resentment among the citizens of our country. Therefore, citing increased incomes as an argument is not correct. I think it would have been better to keep the original rule. A 25% ratio for an income of GEL 1,500 is currently the level of regulation beyond which the National Bank should not interfere in a person’s personal decisions, even taking the argument of increased incomes into account.

“As for banks, this will affect them by reducing their customer base, but this is not particularly significant for banks, since they have other sources of income and are not heavily dependent on loans of this size. What is more restricted is people’s ability, even in critical situations involving their health or education, to take out a loan of an amount that they consider worth the risk given their needs. There is no need to interfere excessively in people’s actions. What is needed is education, and this should not happen through a single statement. Whether it is the National Bank, the government, NGOs, or political parties, they should all work to continuously raise public awareness,” Roman Gotsiridze said.

For reference, changes are being introduced to the rules governing lending to individuals. According to a decision by the Financial Stability Committee of the National Bank of Georgia, the changes concern the debt-service ratio.

Specifically, whereas previously the 25% debt-service ratio requirement applied to individuals with incomes of up to GEL 1,500, under the new decision, from February 1, 2027, this threshold will first increase to GEL 2,000 and then to GEL 2,500.

The National Bank explains the change by citing high economic growth in recent years and the resulting increase in wages, saying that the existing fixed thresholds no longer adequately reflect the current distribution of borrowers’ incomes and their debt burden.