Credit Limits Likely to Stay in 2026 as Banks Prioritize Inflation Fight

As household debt reaches historic highs and millions struggle with credit card balances and loan repayments, Turkey’s tight credit environment is unlikely to ease anytime soon. Despite growing pressure from consumers and the business community, senior banking executives argue that lifting credit limits too quickly could reverse hard-won progress in the fight against inflation.

Speaking to Reuters, Garanti BBVA CEO Mahmut Akten delivered a clear message to markets and borrowers, asking when credit restrictions will end. According to Akten, credit limits are expected to remain in effect throughout 2026, with only gradual, selective adjustments rather than a full-scale removal.

This assessment comes as Turkey continues to operate under strict monetary and macroprudential policies. While these measures have helped slow inflation, they have also constrained access to financing, pushing both households and companies into a tricky balancing act between liquidity needs and high borrowing costs.

Why Credit Restrictions Are Likely to Stay

Akten stressed that maintaining credit limits is essential if Turkey is serious about permanently reducing inflation. Allowing banks to expand lending rapidly, he warned, would risk reigniting price pressures and undoing the progress achieved over the past year.

Explaining his position, Akten said (translated from Turkish):
“If we are serious about bringing inflation down, I do not expect these limits to be lowered, let alone removed. Some minor easing can be introduced, ratios adjusted, and limits modified, which is the right approach. As a banker, it may sound wrong for me to say this, but I believe limits should be changed slowly and gradually. If you grow too fast all at once, you fail to solve the inflation problem and end up back in the same place the following year.”

This unusually candid statement highlights a shift in mindset within the banking sector. Rather than prioritizing aggressive loan growth, banks now appear aligned with policymakers in favor of controlled expansion and macroeconomic stability.

Record Debt and Limited Relief

Turkey has seen a sharp rise in credit card debt and consumer borrowing, driven by high inflation, falling purchasing power, and limited access to alternative financing. In response, authorities recently imposed upper limits on credit card fees and certain loan products, aiming to protect consumers while containing financial risks.

However, these steps have not translated into meaningful relief for borrowers. Many households continue to face elevated interest rates, while businesses report ongoing difficulties in accessing affordable credit.

Why Interest Rate Cuts Haven’t Reached Borrowers

One of the most common questions among consumers is why loan and deposit rates remain high despite Central Bank policy rate cuts. Akten addressed this directly, pointing to regulatory constraints rather than bank reluctance.

According to Akten, the main factor is the Turkish lira deposit ratio that banks must meet on a rolling four-week basis. This requirement forces banks to compete aggressively for lira deposits, pushing deposit rates above the policy rate and limiting how fast lending rates can decline.

Summarizing the issue, Akten said (translated from Turkish):
“Banks are required to comply with a TL deposit ratio every four weeks. Because of this, deposit interest rates are currently higher than the policy rate. Of the 650 basis-point decline seen over the past three months before last week’s cut, about 60% has been reflected so far. We have not yet seen the full impact.”

This explains why monetary easing has been partial and uneven, with its transmission to consumers and businesses still incomplete.

Inflation Outlook and 2026 Expectations

Akten described the recent decline in inflation as progress, but cautioned against complacency. Inflation, which stood around 44% at the beginning of the year, is expected to close the year in the 31–31.5% range. While this represents a significant improvement, Akten emphasized that lasting and structural disinflation is the objective.

Looking ahead to 2026, Garanti BBVA forecasts:

• Inflation is expected to be around 25% by the end of 2026

• Policy interest rates near 32%

These projections point to a slow, cautious normalization rather than a rapid return to low inflation and cheap credit.

Despite strict regulations, Akten noted that credit growth this year is still likely to exceed inflation, mainly due to areas outside tight limits such as credit cards and housing loans. This underscores the delicate challenge facing policymakers: restraining excess demand without triggering a sharp credit contraction.

A Gradual Path Forward

Overall, Akten’s comments suggest that 2026 will be defined by restraint rather than relaxation. While limited flexibility may be introduced through technical adjustments to ratios and thresholds, a complete lifting of credit limits appears unlikely as long as inflation remains elevated.

For consumers and businesses hoping for quick relief, this outlook may be disappointing. From a policy perspective, however, the message is consistent: premature credit expansion risks repeating past mistakes.

As Turkey moves deeper into 2026, the central challenge remains unchanged—reducing inflation sustainably while sustaining economic activity. Credit limits, controversial as they are, look set to remain a core tool in that balancing act.