In the second quarter of 2024, a tightening of lending standards for credit cards was observed. This is evident from the results of the survey on lending activities of the Central Bank of Azerbaijan. According to the survey, banks predict that there will be no changes in the standards for salary lending in the third quarter of 2024, and that there will be a tightening of standards for credit cards.
At a time when demand for credit cards is increasing, this step is interesting. What are the reasons behind the decision to tighten credit standards for credit cards? What will this step bring to banks?
“Caspian” newspaper article on the subject.
According to banking expert Emin Karimov, in many cases citizens buy a card but do not use it. This does not benefit banks: “The amount on credit cards can be used for a certain time. For example, the right to use funds from a card with a validity period of five years is granted for three years and is requested to be paid in the last two years. The client takes the card and keeps it as a reserve. This leads to a decrease in the bank’s income. For example, a citizen applies to the bank and is given three cards with five thousand manats each. Each is not touched, at this time the amount of 15,000 manats on the cards does not generate any income.”
According to the expert, these reasons can lead banks to financial difficulties: “That is, the funds on credit cards are either not used or the citizen pays interest at the end of the term. Banks deliver their funds to the client via a plastic card, but as they cannot obtain the expected income, the profitability ratio decreases to a certain extent. The bank must obtain income from its funds in order to expand the circulation of money. keep the funds on credit cards.”
E. Karimov said that banks prefer to provide cash loans precisely for such cases: “Because the interest is calculated from the day when cash loans are granted. Citizens must repay from the following month.”
When asked how the tightening will affect citizens, our interviewee noted that although the demand for plastic cards is so high, no decrease is expected: “I don’t think that the tightening of the new rules will create difficulties for citizens. Because if citizens don’t like the conditions of the banks, they can also apply for pawn loans at the moment. This is a preventive measure to prevent future trends in the banking sector. It is also possible to waive the rules that were applied later. Since their creation, plastic cards have been popular among people and I think they are a useful financial tool.”
Economist Asif Ibrahimli said that the methods for buying credit cards are very simple. Still, problems arise:
“In general, there are serious problems related to credit cards and other credit products related to non-payment of debts in banks. Since the conditions for obtaining credit cards are very simple, any credit card is offered to a citizen with a salary card in that bank. The citizen also easily obtained it. But in many cases there are cases of non-payment of the amount taken. I think that a decision will be made on this matter, in general, measures should be taken in accordance with the requirements of certain international standards regarding the purchase of bank cards.
The economist said there were many cases of dissatisfaction with credit cards, which could have been avoided: “Here the bank has managed to ensure that debts are repaid on time.”
According to A. Ibrahimli, there is no situation that could cause concern for people who can repay the loan: “There will be no alienation from citizens who have an official job and a normal credit history. Only changes will be made to certain procedures and the rules may become even worse.”
