NBG tightens lending terms for retail borrowers

The National Bank of Georgia (NBG) plans to tighten retail lending conditions starting 1 February 2027, introducing recalibrated Payment-to-Income (PTI) ratios that enforce lower monthly debt-service ceilings for low- and middle-income borrowers.

Under existing macroprudential regulations, borrowers earning under GEL 1,500 per month face a maximum monthly debt service-to-income limit of 25 per cent (capped at GEL 375). For individuals earning above GEL 1,500, the allowable monthly debt service cap rises to 50 per cent (or GEL 750).

Under the new regulatory framework taking effect on 1 February 2027, the income threshold subject to the tighter 25 per cent debt cap will rise from GEL 1,500 to GEL 2,000. It will then be raised further to GEL 2,500 on 1 September 2027.

According to a statement released by the NBG’s Financial Stability Committee, the original PTI benchmarks were set using 2017 baseline statistical data and updated in 2022 amid rising nominal economic indicators. The central bank explained that the latest recalibration aims to mitigate household over-indebtedness risks and bolster the overall resilience of Georgia’s financial system.

“The Financial Stability Committee has resolved to undertake a further recalibration of the PTI ratio thresholds. The initial evaluation of PTI limits was based on 2017 statistical data, which was subsequently updated in 2022 against the backdrop of nominal economic expansion. At the present juncture, recalibrating these threshold caps has become necessary to maintain macroprudential balance.

Alongside rapid economic growth in recent years, wages and other nominal indicators have expanded significantly. As a result, the existing fixed thresholds no longer accurately reflect the current distribution of borrower incomes or their true debt burden. Leaving PTI limits unchanged would mean borrowers shift into higher income bands simply due to nominal wage growth, rather than a real upgrade in their creditworthiness.

Updating these thresholds aligns the PTI macroprudential framework with the current economic environment and maintains the central bank’s intended macroprudential stance. Furthermore, to avoid a sharp, one-off shock to credit markets and smooth the policy impact over time, the committee decided to implement a phased increase in the income thresholds.

In practice, the stricter 25 per cent debt cap, which previously covered monthly incomes up to GEL 1,500, will apply to earnings up to GEL 2,000 from 1 February 2027, rising to GEL 2,500 from 1 September 2027. This measure will safeguard against over-indebtedness and preserve financial system stability,” the Financial Stability Committee’s report noted.