Problem loans in Uzbekistan's banking system arise due to riskiness, outdated lending models, high concentration of corporate loans, and other factors. Currently, their share in the total loan portfolio (3%) is relatively low, Central Bank Chairman Timur Ishmetov told the Senate plenary session on June 13.
Senator Nusratulla Pardayev highlighted the issue, noting that the total volume of problem loans stands at 22 trillion soums. “Banks must form reserves for these problem assets. This leads to the freezing of financial resources in the banking system that could be directed to the economy,” he said.
The senator asked Ishmetov how the Central Bank assesses the level of problem loans from a financial stability perspective and whether they negatively affect banks' lending or economic financing capabilities. He also inquired about practical measures to reduce problem loans.
Ishmetov emphasized that problem loans are a natural phenomenon for any banking system, and the main focus should be keeping them within safe limits. “Problem loans are a natural state for the banking system. The main task is to keep their level manageable and safe. They will never disappear: problem loans are constantly collected by banks, but new ones always appear,” he said.
The main reason, according to the regulator's head, is the inherent risk in any lending activity. For example, entrepreneurial lending itself involves risk. No matter how strictly a business plan is followed, factors beyond the entrepreneur's control can cause deviations, leading to problem loans.
“Therefore, this (problem loans) is a natural phenomenon that always occurs in entrepreneurship and in relations between banks and entrepreneurs. Our task, as I said, is to assess risks in advance and keep them low,” Ishmetov said.
He noted that it is more appropriate to assess the level of problem loans as a share of the total portfolio rather than in absolute numbers. “If we look at our level not in absolute numbers but as a share of the total portfolio, maintaining around 3% is considered relatively low,” he stressed.
The Central Bank chairman acknowledged that besides risk, some shortcomings in the system itself contribute to problem loans. “At the same time, there are some shortcomings in the banking system itself. We must admit this. It would be fair to acknowledge that the preservation of an outdated lending model, in a sense, also raises questions about the efficiency of banks' risk management mechanisms,” Ishmetov said.
He also noted that high concentration of large corporate loans in some banks, certain weaknesses in some economic sectors, and other factors affect the level of problem loans.
“I repeat: our level of problem loans is not so high as to limit lending activity or pose a threat. Overall, the banking system has sufficient capital and liquidity reserves, and 80% of net problem loans are covered by reserves,” the Central Bank chief stressed.
Since last year, the regulator has launched a 2-3 year program with international experts to improve risk management and internal audit systems in banks. The program includes methodological guidance, staff retraining, and other areas.
A separate unit for problem assets has been established within the Central Bank, Ishmetov said. Its work focuses not only on existing problem loans but also on studying which sectors' weaknesses most affect the problem loan level. The regulator has also set up a system to analyze large borrowers and provide early warnings to banks about potential problem loans.
Ishmetov also touched on preferential loans, saying the issue of reducing their share in the total loan portfolio is being considered. “Over the past five to six years, we have reduced the share of preferential loans, and in the coming years we are also considering a gradual reduction to give a positive impetus to the quality of bank assets,” he concluded.
According to the Central Bank chief, 2025 was a year of focus on early detection of financial risks and systematic work with problem assets. By end-2025, the share of problem loans in the total portfolio decreased by 1 percentage point from 2024 to 3%. Currently, 85% of loans are classified as standard. “Overall, 2025 was a period of transition from simple monitoring to an active management approach in asset quality control,” Ishmetov said.
A special working group on problem loans has been created to address systemic causes of loan payment delays. The group conducts in-depth analysis of problem loans by region, sector, and large borrowers. “Our main goal is to maintain a low share of problem loans while introducing mechanisms for early detection of possible financial difficulties among borrowers,” the Central Bank chairman stressed.
Source: www.gazeta.uz