Tashkent, Uzbekistan (UzDaily.uz) — The Central Bank of Uzbekistan has issued recommendations to commercial banks on taking into account citizens’ interests and possible social consequences when accepting as collateral the only home where a borrower and their family permanently reside.
Banks are advised in such cases to prioritize assessing a client’s ability to repay the loan. The value and liquidity of the property offered as collateral should not be the main factor in deciding whether to issue a loan. Where possible, banks should consider alternative forms of collateral.
Before signing a loan agreement, clients should be clearly informed about the possible consequences of failing to repay the loan, including foreclosure on the pledged sole home and its subsequent sale.
The recommendations also apply when a citizen pledges their only home as collateral for a loan taken by another individual or an entrepreneur. If the debt is not repaid, the pledged property may be subject to recovery proceedings even if the owner is not the borrower.
If overdue debt arises, banks are advised to assess the borrower’s financial situation before taking recovery measures. In such cases, banks are also encouraged to consider restructuring the loan or using other ways to settle the debt.
The Central Bank stressed that the recommendations do not prohibit the use of a sole home as collateral. Their purpose is to ensure proper assessment of clients’ ability to repay loans, provide advance information about possible consequences and promote responsible lending practices.
