ISTANBUL, Aug 19: New rules to rein in credit card debt in Turkey will force the country’s banks to set aside more funds to cover non-performing loans, cutting 2 billion lira ($1.03bn) off their annual profits, a senior government official said.

The rules obliging credit card holders to repay more of their debts each month were announced weeks after Prime Minister Tayyip Erdogan urged Turks not to use credit cards, accusing banks of locking people into poverty with excessive fees.

The measures announced on Friday by Turkey’s banking watchdog, the BDDK, will make it harder for consumers to pile up more credit card debt than they can afford.

The government also wants to boost personal savings and reduce household spending on imported consumer goods that have bloated Turkey’s current account deficit. The effect in the medium-term is that many consumers with existing debts will struggle to make the higher repayments. Banks with big credit card portfolios that could be hit hardest by the change include Akbank, Garanti Bank Yapi Kredi and Isbank.—Reuters