Seyran Sargsyan: Prolongation of the amnesty for fines / penalties on  bad loans - will be the wrong message for clients

ArmInfo. "It should be conveyed to clients that we cannot expect further extension of the terms of the amnesty of fines and penalties for bad loans, otherwise it will  be an incorrect message to the population," Executive Director of the  Union of Banks of Armenia Seyran Sargsian told ArmInfo  correspondent.

According to S. Sargsyan, there is a need to explain to the  population the position of the bank in terms of its readiness to help  borrowers in restoring and servicing the loan, and to demand the same  from clients.At the same time, when asked whether to extend the  amnesty, S. Sargsyan answered: "This is an exclusively political  question. Having previously conducted monitoring, it was revealed  that as a result of the amnesty of fines and penalties for problem  loans, the process of servicing loans to borrowers was greatly  simplified.  As a result, the government amended the law and launched  this amnesty program. That is, it was the decision of the  authorities, reflecting their readiness. Consequently, the government  must then decide whether it is ready to take such a step again or  not>.

Recall that July 2, 2018. The Prime Minister held a meeting with the  bankers in the government of the Republic of Armenia in order to  practically address the issue of concessions of fines and penalties  for problem loans. On the same day, ACBA-Credit Agricole Bank and  Ameriabank announced the cancellation of fines and penalties on bad  loans of individuals, and the next day IDBank joined this process,  then July 4 - VTB Bank (Armenia), July 6 - Ardshinbank, July 11 -  Converse Bank. Later and the rest of the banks. At that time, banks  applied amnesty on fines and penalties of loans classified as  uncollectible until May 31, 2018, and announced the final date for  filing applications for amnesty on December 31, 2018.

After that, in January 2019, only one bank - IDBank announced the  extension of the deadline for submission of applications until August  of this year.According to the Financial Ratings of Banks of Armenia  as of December 31, 2018, prepared by ArmInfo IC, overdue loans in the  banking system of Armenia accelerate growth - their volume increased  by 19.4% in 2018, against a meager 0.4% growth in 2017. Due to the  upward dynamics of overdue loans, the share of NPL in the loan  portfolio increased by the end of 2018 to 9.4% from 8.3% in 2017. In  the loan portfolio of3.2 trillion drams ($ 6.7 billion, with an  annual growth of 14%) overdue loans accounted for 306.5 billion drams  ($ 633.5 million). Of these, over 34% is accounted for by a hopeless  group, which dominated the structure of overdue loans a year earlier  (60.2%). The bulk of bad loans went into consumer loans (including  mortgages) - 34%, the commercial sector - 17%, the agricultural  sector - 14% and industry - 8%. In the total volume of overdue loans,  these areas also dominate: consumer loans (including mortgages) -  32%, trade - 14%, industry - 12% and the agricultural sector - 11.5%.  Nonetheless, the government initiative for the amnesty of fines /  penalties for bad loans with concomitant refinancing, launched last  year, which banks started to implement without delay, allowed for a  net profit growth of 79% in 2018.