In September 2008, the National Bank of Georgia introduced a new monetary policy instrument – one-week refinancing loans. Through this policy instrument the National Bank of Georgia supplies short-term liquidity to the country’s banking system when needed.
The refinancing instrument is intended to manage short-term interest rates on the interbank money market. As the National Bank of Georgia is the only supplier of short-term liquidity on the Georgian lari market it is capable of attaining the desired level of the interest rate on the interbank market. On a weekly basis, the liquidity forecast group estimates the short run liquidity deficit in the banking system. Based on the forecast, the NBG announces an auction for a specific amount of refinancing loans and local banks have the right to participate in that auction. NBG certificates of deposit, government securities, international bank guarantees, and the banks’ selected own credit assets in the national currency can be used as collateral. The interest rate on a refinancing loan is defined according to the monetary policy rate (and is no less than that).
In April 2010, the National Bank of Georgia introduced a new policy instrument called guaranteed refinancing loans. Through this policy tool, local commercial banks can get loans without auctions. The rate on guaranteed refinance loans is defined as the monetary policy rate plus 1.5 percentage point.