Making banks consumer-oriented
09 June, 2011
Making banks consumer-oriented


Georgian Central Bank introduced a new consumer-oriented initiative obliging banks to provide consumer with full and detailed description of contracted costs and benefits on loans and deposits prior conclusion an agreement. The Bank believes this initiative will boost competition and cut down interest rates in Georgian banking sector.



The rule on “Provision of Necessary Service information to Bank Customers” became introduced by National Bank of Georgia (NBG) starting June 1st of 2011. The rule is a follow up of NBG’s consumer-oriented

policy undertaken last year on purpose to make consumer more protected and happy, Giorgi Kadagidze, President of the NBG, said.

According to him, this complex document will regulate the relationships between the commercial banks and their customers once and for all and promote better competition in the banking sector, “which will  be reflected on the banking product value – on the rates,” Kadagidze stated during briefings on June 1st, 2011.

The rule is applied to all kinds of loans issued to private persons the total credit amount of which varies between GEL300 and 50 thousand. Also it covers all kinds of deposit contracts with private persons the first installment of which is less than GEL 50 thousands. The rule obliges the banks to indicate in the contract all the costs related to the use of credit or deposit, effective rate of the product, information on currency risks, the rule of amendments of the contract, etc.  Moreover, banks shall be responsible to develop a standard written procedure for receiving grievances from the customers and send the statistics to the NBG monthly.

In case of noncompliance to any provision of the contract on the part of the banks or other cases of dissatisfaction with the bank services, the customer has a right to put forth their grievances orally, in writing or electronically. They shall receive a written reply from the bank over their grievance in a predefined time. If the customer thinks that their rights have been violated and did not get the relevant response from the servicing bank, he/she can apply to the newly established division of the NBG for protecting customers’ rights for consultation through their website or hotline 2-406-406.

The division for protecting customers’ rights of the NBG is also responsible for the customer grievances, study them and inform the customers of their decision.

After discussing whether or not the clients’ claim is fair the NBG will give due recommendation to the questioned bank and it is supposed to comply with it to save its reputation, if client still remains unsatisfied they can go to court as a final instance.

“But by this here rule on consumers rights protection we tried to create an effective mechanism of clients’ claim consideration before the court,” Kadagidze said.

If recommendation does not work the NBG does not rule out introduction of sanctions but before they will be observing how the new rule will work.

The NBG introduced an obligation on provision of necessary service based on hot-line call that identified contract-terms problems between banks and clients and worked out a comprehensive document together with banks to alleviate the problem, Kadagidze explained to Georgian Journal.

Banks are as interested in this new initiative as consumers, Zurab Gvasalia, President of Association of Banks of Georgia explains. According to him, clients frequently claim that they did not understand contract terms at the onset but shied to inquire details. Sometimes clients refuse to pay off loans saying that they did not understand through contracts how much they were supposed to pay in fact.

As a matter of fact clients may easily get lost in the intricate details of interest  rate and currency exchange rate related benefits and the Ethic Code of Georgian banks [signed by 13 banks already] envisages provision of clients with full and detailed information prior to contract conclusion, and banks actually observed this rule but some people still became confused. The point is that clients may take contract home and get legal advises from their trusted experts and only afterward sign contracts but some people cannot guess to use even this chance that leads to complications ultimately.

“To avoid further complications the NBG very aptly put these explanatory obligations in legal framework,” Gvasalia told GJ. “The key asset to banks is trust and since some clients felt ignored and unprotected the NBG found a legal solution to the problem and obliged banks to explain to clients real banking service price and costs.”

Georgian banks swear they were providing clients with all due details prior to this new rule although acknowledge  that the new rule will raise awareness of clientele that ease bank-client relationship: once provided with comprehensive information on banking products clients may compare real advantages and draw well-weighted not spontaneous decisions, ProCredit Bank said to GJ.

Bank of Georgia (BOG) expects easing of relationships with clients thanks to new regulations, for customers are supposed to be happier.

“For example in loan contract clients will get due information easier as all loan-related costs that were dispersed in different paragraphs throughout the contract will now be accumulated and placed on the first page,” BOG spokesperson said.

This law has no back-work effect however that means those who felt ill-treated before June 1st [when the new law entered into effect] may find the truth at courts alone.


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