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Loan Borrowers in Kazakhstan Could Face Tougher Lending Criteria Soon
Here's the lowdown on what's happening: Banks in Kazakhstan are planning to tighten their lending criteria for high-risk borrowers. But why's that, you ask? Well, it's all about credit history, multiple loans, and a concoction of other financial factors.
When you're seeking a loan, you're basically promising to fork over the loan amount, along with the interest, set by the bank or financial institution. However, not every borrower fully grasps the gravity of their promise, believing they can wriggle out of credit obligations when things get tough financially. But let's set the record straight—financial woes don't grant a free ticket out of debt repayment.
If you've been contemplating the idea of walking away from your debt due to overwhelming financial burdens, think again. Soon, banks might turn a blind eye to potential borrowers with red flags like scanty credit history, piles of late payments, and multiple loans scattered across several financial institutions.
The financial regulator of Kazakhstan, the Agency for Regulation and Development of the Financial Market, has conjured up a draft resolution to rearrange the rules for banks' risk management systems.
So, why should you care about this draft resolution? Because it could revolutionize the way banks assess a borrower's risk level. According to the proposed amendments:
- A borrower will be branded a high-risk borrower if they possess two or more of these warning signs:
- Newbie credit history (3 years or less)
- More than 3 late payments within the last year
- Outstanding loans in 3 or more credit organizations
- Monthly loan repayment eats up 45% or more of their income
- Negative credit history entries
- Unverified income source
If a bank still decides to issue a loan to a high-risk borrower, they'll have to perform a default probability assessment—essentially, assessing the likelihood that the borrower can't repay their debt.
If the probability of default increases by more than 5 percentage points, and the borrower's risk exceeded 5%, the bank will have to keep a close eye on the borrower's financial health.
Keep in mind that these changes are still up in the air; the draft resolution is currently under public discussion, with the deadline for comments on May 15, 2025.
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- The tightened lending criteria for high-risk borrowers in Kazakhstan could potentially impact personal-finance management, as banks may scrutinize factors like credit history, multiple loans, and loan-to-income ratio more stringently.
- Under the proposed draft resolution, indicators such as a newbie credit history, more than 3 late payments in a year, multiple loans in different financial institutions, and high loan-to-income ratio could label a borrower as high-risk.
- If a borrower is categorized as high-risk in Kazakhstan, banks may conduct a default probability assessment to evaluate the likelihood of loan default, which could lead to stricter loan conditions or reduced approval rates for personal-finance loans.
- The likelihood of facing tougher lending criteria depends on the outcome of the public discussion surrounding the draft resolution, which has a deadline for comments on May 15, 2025.
