Baku, August 7 – The Central Bank of Azerbaijan (CBA) has introduced new regulations aimed at promoting more responsible consumer lending and reducing excessive household debt. Under the revised rules, a borrower’s total credit card limit—including all existing obligations—may not exceed five times their net monthly income.
The reforms also establish a 40% conversion coefficient for off-balance consumer credit card debt, a measure intended to better reflect the true credit risk posed by such products.
According to the official CBA statement, the changes are designed to strengthen the capital resilience of the banking sector, prevent unsustainable lending practices, and protect consumers from over-indebtedness. The move comes amid growing concern over a surge in non-performing loans and rising debt burdens among the population.
In a Facebook post, Vugar Bayramov, a member of the Milli Majlis Committee on Economic Policy, Industry and Entrepreneurship, welcomed the decision, calling it a necessary step in addressing the root causes of credit defaults.
“One of the drivers of rising loan delinquencies has been the issuance of credit lines that exceed a client’s repayment capacity, coupled with unjustifiably high penalty rates,” Bayramov noted.
He cited official data showing that overdue consumer loans jumped from 475 million AZN in January to 527 million AZN by mid-year—an increase of more than 10% in just six months. During the same period, the total loan portfolio grew only by 4.4%, from 24.89 billion AZN to 25.99 billion AZN.
“This imbalance signals a troubling trend. The volume of problematic loans is growing faster than the credit market itself, which reflects negatively on the overall health of the banking system,” Bayramov warned, adding that debt burdens were increasingly eating into the disposable incomes of Azerbaijani households.
Under the new rules, a consumer earning a net income of 1,000 AZN per month cannot have a credit card limit exceeding 5,000 AZN. All other existing debts are factored into this cap. However, credit lines secured by cash or precious metals are exempt from the restriction.
Furthermore, banks are now prohibited from holding unsecured consumer credit lines exceeding 1% of their Tier 1 capital (after deductions).
Another key update involves the inclusion of overdraft limits under the broader definition of credit lines. The risk weight for such off-balance sheet obligations will now be calculated at 100%, with a 40% conversion factor.
“Overdraft services allow cardholders to spend more than their actual balance. Some banks exploit this by imposing high interest rates, creating unsustainable debt burdens,” Bayramov explained. “This area still requires further regulatory tightening.”
While he praised the CBA’s move as a welcome development in curbing runaway consumer debt, Bayramov emphasized that “continued refinement of credit regulations remains a priority.”
