Armenian Premier intends to restore order in banks and credit organizations alienating collateral practice

ArmInfo. The Prime Minister of  Armenia instructed the Ministry of Justice to give a legal assessment  and submit in a month's time its proposals on changing the practice  of disposal of collateral by banks and credit companies. Karen  Karapetyan stated at the government meeting that in the credit market  of the country there was a practice, according to which banks and  credit companies, in case of default of loans from borrowers, during  whole and sometimes long term of alienation of collateral, wind up on  non-creditworthy customers corresponding fines and penalties. As a  result of this practice, even if the cost of collateral is initially  significantly higher than the loan amount, in the long run, in  practice, along with the fines, the amount of debt increases to the  value of the collateral.  The prime minister found this practice  unacceptable and instructed the Ministry of Justice to introduce  changes in the legal aspect of the problem.

According to the "Financial Ratings of Armenian Banks" latest  bulletin prepared by IC ArmInfo, the growth rates of the total loan  portfolio of banks accelerated in 2016 to 23.6% from 3% in 2015  against the background of improved dynamics of standard loans from  8.3% to 16.5% % With a slowdown in the growth of the total volume of  NPL from 50% to 13%. But even with such an improvement in the  dynamics of the loan portfolio, a more substantial growth is  maintained in high-risk groups - dubious and hopeless - by 35% and  42%, the aggregate volume of which is 3 times higher than the  low-risk groups (controlled and non-standard) - 187 billion versus 62  billion AMD. Over 73% of bad loans accumulated in consumer loans,  agricultural sector, trade and industry, with a third of consumer  "hopelessness" settled in the mortgage.