Azerbaijan Central Bank Caps Loan Guarantors' DTI at 70%

The Central Bank of Azerbaijan (CBA) has tightened its credit risk rules, capping the debt-to-income (DTI) ratio of anyone who guarantees a consumer loan at 70% and barring banks from relying on modelled income estimates when a borrower's earnings can be documented. The changes are set out in Decision No. 39/3 of the CBA Board, dated 15 September 2026, which Trend reported on 12 October 2026.

The decision amends three sets of rules: those on credit risk management in banks, on asset classification, and on prudential standards for credit risk, including large exposures. It comes as household borrowing grows faster than the wider economy and the volume of overdue loans rises.

What changes

• Guarantors: where a guarantor backs a consumer loan, the guarantor's DTI ratio must not exceed 70%. The requirement applies only to loan applications submitted after it takes effect.
• Written-off model loans: loans issued on the basis of a model and written off the balance sheet in the previous 12 months will be included when the approved loan amount is calculated.
• Income tests: banks may no longer use projected income from a behavioural model when a borrower's income can be established from documents or from government information systems. Acceptable evidence includes an employer's salary statement, a pension statement, proof of pension or benefit payments, a bank statement showing interest earned on deposits, or other documents confirming income.
• Instalment sellers: for loans to companies that sell goods to consumers in instalments, and to individuals who do so without forming a company, banks must compare the portfolio size and number of buyers the borrower reports to the bank with the data it submits to credit bureaus. If either measure matches by less than 90%, that must be taken into account when the loan is classified.
• Terminology: the category "standard asset subject to additional risks" is renamed "asset under observation".

When it applies

According to Trend, the amendments take effect one month after the resolution is published and, subject to exceptions, apply to credit claims that arise after that date. The report did not give the publication date, so the exact start date could not be confirmed.

Why the regulator is acting

Consumer credit has been one of the fastest-growing parts of the banking market. Consumer loans issued by banks rose 11.7% year on year in June 2026, the CBA said in its August Monetary Policy Review, which named consumer lending as one of the main factors behind rising household demand. The consumer loan book of banks and non-bank lenders reached AZN 9.9 billion ($5.82 billion) at the end of June, up 6% since January, within total lending of AZN 33.9 billion, Trend reported, citing the CBA.

Asset quality has weakened at the same time. Overdue loans reached AZN 721.8 million on 1 September 2026, up 36% from a year earlier and equal to 2.1% of the total loan portfolio, compared with 1.6% at the end of 2025, Report said, citing the CBA. CBJ reported in September on the sector's eight-month earnings and asset growth.

Two of the changes target the reliability of the information behind credit decisions: documented income replaces modelled estimates where records exist, and instalment sellers' figures must match what they report to credit bureaus. Household incomes are rising, which supports repayment capacity: nominal income grew 9.6% in January to September 2026, Report said, citing the statistics committee.

For lenders, the likely effect is closer scrutiny of borrowers whose income cannot be documented and of applicants relying on heavily indebted guarantors. Trend's report did not include an estimate of the impact on loan volumes.

What to watch

• Publication of the resolution, which will fix the date the rules take effect.
• Monthly CBA data on consumer lending and overdue loans once the rules apply.
• Any guidance on the exceptions the decision allows for existing credit claims.
• How banks treat borrowers with informal income, and how instalment retailers adjust their credit bureau reporting.

Sources: Trend, 12 October 2026; Central Bank of Azerbaijan, Monetary Policy Review, August 2026; Trend, 12 August 2026; Report, 25 September 2026; Report, 9 October 2026