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EghtesadOnline: Banks' lending rates are still high and the government is making efforts to lower the lending rates in line with the inflation rate, said the Central Bank of Iran's governor.

"Since we achieved single-digit inflation last year, banks' lending rates should be around 10%," Valiollah Seif was also quoted as saying by IBENA.

The official noted that CBI is still trying to prevent any irregular increase in banks' lending rates.

Iran’s inflation rate eased into single digits in June for the first time in a quarter century following the lifting of sanctions against Tehran after the implementation of a landmark nuclear agreement, formally known as the Joint Comprehensive Plan of Action, in January, according to Financial Tribune.

The Money and Credit Council–the highest monetary decision-making body – voted on June 2016 to lower lending rates by two percentage points. The decision came after private banks decided to voluntarily lower their one-year deposit rates from 18% to 15%–a move soon embraced by public-sector lenders.

According to MCC’s vote, the interest for both Musharaka (joint partnership) and regular non-Musharaka loans is 18%. The rate for these two types of loans previously was 20% and 22% respectively.

Back then, the CBI chief had said that cutting loan rates will help industries and lift their production.

Once again Seif emphasizes that the banking system is in need of reforms.

"The health of our banking system is a reflection of not only the balance of our banks' incomes and expenses, but also of their debts and assets," he said.

The CBI governor further said non-performing loans and credit crunch are two major issues pressuring banks.

"Don't interpret it as a shortcoming on the part of our banks. In fact, they allocated 4,770 trillion rials ($127.2 billion) of loans in the 11 months to February 18, 2017," he said.

Seif noted that in an impressively successful plan, the banking system managed to grant loans worth 170 trillion rials ($4.5 billion) to 24,000 small- and medium-sized enterprises.

The loans were part of a government plan to provide struggling SMEs with a total of 160 trillion rials ($4.2 billion) this year to stimulate the industrial sector, which has been grappling with a deep recession in the past few years.  

CBI Valiollah Seif Iran Inflation Iran interest rates Iran lending rates