Stringent Banking Regulations
Using credit card is controversial issue in Turkey because rising rate of using credit card can arise problems in terms of financial woes such as consumer borrowing and also high rate of using credit card has concerned government. As a result of this, the banking regulator in Turkey has moved to limit on credit card usage. According to the Banking Regulation and Supervisory (BDDK) introduces new regulations and intends to prevent unnecessary expense. In respect to this, there are payment restriction regulations which ensure card holders to use credit card in terms of installment.
The purpose of draft legislation is that card holders keep away from usage of credit card for every spending. In particular, payment in installments will be restricted to six months for purchases in the some sectors such as electronics, jewelry and car rental whereas there will be restrictive to a maximum of 12 months for purchases of furniture and household appliances. Nevertheless, grocery store and gasoline purchases are not involved in payment installment. In addition to this, there are restrictions for commercial vehicle and mortgage loan. Under these circumstances, new draft legislation will be envisaged that there is the restriction of consumer credit to a 36 month loan and of car credits to 48 months. Moreover, ones who have credit cards prefer to use for social expenditures such as tourism. Especially, government has touched on tourism issues so as to bring limitation because it is not allowed to make use of credit card for holiday expenditures and encourages people to shrink the rate of usage of credit card. Due to fact that the regulation of the credit card market alters the structure of society and people cannot benefit from credit card in every sectors. Main aim is to protect and control people's spending through regulations since countries face with global financial crisis and using credit card enable them to go deeper into debt.
Macro Economic Stability and Saving Rates
Such restrictive banking regulations have not emerged out of the blue. The overarching reason looming behind such restrictions is the low saving rate of the Turkish economy. In spite of country's economic success and its association with strong emerging markets, Turkey has one of the lowest saving rates among the emerging economies. This problem might have been abated if it was not intricately connected with another major problem of the Turkish economy; namely the current account deficit. The saving rate of the Turkish economy now stands at 12.6 % of the GDP which is the historical low of the modern Republic and the current account deficit for the last twelve months has reached 60 billion dollars. Moreover the credit volume has already reached the staggering number of 1 trillion dollars. In order to increase the savings the Turkish government has already adopted a midterm economic programme that will cover the periods between 2014-2016 in which the key concern will be to clamp down the spending, increase the saving rates alongside the reduction of current account deficit and the inflation.
Given such an effort on the part of the Turkish government to increase saving rates, it is no surprise that such banking and credit related measures are being taken like limitations on installment rates and more stringent rules for credit applications. Therefore the banking sector in Turkey should take up this challenge and look for new ways for operating in a strictly regulated credit market. However the upside for the banking sector is that the regulation will provide the banks to operate in a more secure lending environment where the barrower has the actual capacity to pay the loan back to the creditor institution.
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