This paper examines the dynamics of over-indebtedness among the Georgian population in the context of financial literacy levels and the responsible lending framework introduced in 2019. The relevance of the study is driven by the growing imbalance between the digital accessibility of financial products and consumers' rational financial behavior. The primary objective of the study is to evaluate the effectiveness of administrative restrictions—specifically, Payment-to-Income (PTI) and Loan-to-Value (LTV) limits—in mitigating over-indebtedness when financial education remains low. Using a mixed-methods approach, the paper analyzes quantitative data from the National Bank of Georgia and Geostat (including NPL indices and household debt burdens from 2018 to 2025), alongside a comparative assessment of financial literacy surveys conducted by international organizations, such as the OECD. The findings indicate that while the responsible lending framework successfully reduced systemic risks and default rates within the formal banking sector, the deficit in financial literacy led to a migration of low-income borrowers toward less-regulated, informal financial markets. Consequently, individual over-indebtedness persisted outside the banking perimeter. The paper concludes with policy recommendations emphasizing the integration of an enhanced national financial education strategy as a critical complement to macroprudential regulations.
