Jan 11 2019

Cut interest rates on dollar loans, Turkish business chief says

Turkey’s banks are charging excessive interest rates on foreign currency loans, according to the head of one of the country’s largest business groups.

Companies are forced to pay annual interest rates of between 10 percent and 13 percent on borrowing, while banks are attracting foreign currency deposits by paying customers 5 percent annual interest, said Şekib Avdagiç, who heads the Istanbul Chamber of Commerce, according to Dünya newspaper.

Turkish firms are finding it more expensive to borrow after the lira lost almost a third of its value against the dollar last year. Many have applied to banks to restructure loans, while others have sought court protection from their creditors as an alternative to bankruptcy.

Banks need to think of the country rather than themselves, Avdagiç said. Exporters are particularly affected by the high rates of interest on the loans in dollars and euros, he said.

Credit growth in Turkey has declined in recent months amid a sharp slowdown in economic activity and after an increase in non-performing loans and debt restructuring. The economy contracted 1.1 percent on a quarterly basis in the three months to September.

Avdagiç welcomed a government initiative this week to restructure credit card debt via loans from state-run Ziraat Bank. The measure was well-timed, because some people had started to struggle with repayments, he said.