FEBRUARY: Outstanding loans grow by over 725 million lei

• Overdue payments hiked 225%

Ana Săbiescu

The amount of arrears for loans taken out in lei as well as in foreign currencies climbed 225% in February 2009 YOY, reaching 4.252 billion lei, according to data published last week by the Central Bank. In February 2008, overdue payments for loans taken out in lei and foreign currencies amounted to 1.306 billion lei.

Compared to January 2009, outstanding loan payments increased 17% for loans taken out in lei, and 25% for loans taken out in foreign currencies, thus logging a 725.96 million lei increase. Overdue loan payments reached 2.421 billion lei, for loans taken out in the domestic currency, and 1.831 billion lei for loans taken out in foreign currencies.

The level of outstanding payments for loans taken out by Romanian customers has been growing at an alarming rate since the beginning of the year, despite the fact that bankers repeatedly said that they will support customers which have trouble making their payments and who need to have their loan payments rescheduled or postponed for specific time frames.

Meanwhile, banks have been steadily increasing their risk provisions in order to be able to handle the steadily increasing overdue loan payments.

Because of this, the National Bank of Romania took a first step towards helping banks, by changing the regulation concerning the creation and utilization of provisions for loans with payments overdue for more than 90 days. The new regulation allows banks to reduce the level of provisions for non-performing loans by at most 25% of the value of the loan"s collateral.

Analysts expect an increase in loan arrears and non-performing loans, but they can"t make an accurate prediction on that subject.

Recovering their receivables is in the banks" interest, even if they do so over a longer period, whereas debtors must pay their installments in order to be able to take out other loans in the future.

The total amount of loans granted by the banking system stood at 83.86 billion in February 2009, logging a slight drop MOM, whereas the foreign currency loans saw a slight increase MOM, to 124.05 billion lei.