Central Bank warns commercial banks

The Central Bank has warned commercial banks about the practices they apply in imposing measures and sanctions when borrowers fail to meet payment obligations stipulated in loan (microloan) agreements on time. This was stated in an official letter issued by the Central Bank.

According to the findings, in some cases the sanctions imposed by banks for delayed loan repayments are disproportionate both to the original loan amount and to the lender’s actual costs.

In particular:

•  When payment deadlines are violated, interest charged on overdue amounts is increased by 1.5 to 3 times compared to the annual rate specified in the loan agreement, and in some cases reaches 150–180 percent per annum. As a result, such sanctions effectively become an alternative form of interest income.
•  When interest payments on loans are delayed, daily penalties are charged without a defined upper limit, with the annualized amount in some cases exceeding the original loan value several times over.
•  Additional one-time fines unrelated to the lender’s actual costs are imposed for each instance of delayed payment.

At the same time, cases have been identified where increased interest rates, penalties, and one-time fines are applied simultaneously. As a result, the total additional costs associated with delayed payments become several times higher than the cost of servicing the loan in good faith and on time, creating a real financial burden for borrowers that makes fulfilling their obligations economically difficult.

The Central Bank notes that such practices form an economic model in which it becomes more profitable for lenders to benefit from delays rather than to prevent them or assist borrowers in making timely payments.

It is also noted that such contractual conditions objectively encourage lenders to generate income from payment delays rather than ensure payment discipline. This undermines transparency in the disclosure of lending terms, as borrowers may not fully assess the true financial consequences of breaching obligations at the stage of making a borrowing decision.

Such practices disrupt the balance of interests between parties and may lead to increased social risks, a rise in the number of public complaints, and a decline in trust in the banking system.

The Central Bank emphasized that sanctions for delayed fulfillment of obligations should be compensatory in nature. It considers it unacceptable to include contractual terms that create economic incentives for lenders to profit from delays or turn borrower liability measures into an independent source of income.

Earlier, it was reported that in Uzbekistan the recovery of loans from citizens who fell victim to fraud while obtaining online loans had been suspended.