EghtesadOnline: The Central Bank of Iran in its latest report said debts of banks and credit institutions to the CBI totaled 1.5 quadrillion rials ($11.32 billion) in the calendar month September 22, up 37.3% year on year and 14.1% compared to the last yearend (March 21).
Statistics indicate the major cause of increase in the banking system’s debts originates from overdrafts of non-government and private banks along with those of credit institutions. Figures show these banks and institutions owed 1.01 quadrillion rials ($7.65 billion) to the CBI during the month, registering a staggering 100.1% hike compared to same month last year and 26.6% rise compared to last year.
Accordingly, 39 trillion rials ($294.33 million) of this amount belonged to commercial banks, indicating 64% decline YOY and down 13.5% compared to last year, IBENA reported.
This is while debts of specialized state banks to CBI had a share of 453.7 trillion rials ($3.42 billion) in the month down 5.9% YOY and 3.9% compared to last year, Financial Tribune reported.
CBI Governor Abdolnasser Hemmati earlier expressed discontent over banks’ performance and sent a directive to the banks obliging them to clear their remaining overdrafts with the CBI. Accordingly, the banks and credit institutions which still have overdrafts in CBI were banned from receiving new loans until they repay the debts.
Increase in bank debts to CBI is a primary factor contributing to the explosion in liquidity growth that has led to galloping inflation. Hence, keeping overdrafts in check can have a positive role in controlling inflation when times are hard.
Analysis show banks are facing another serious problem and if they do not come up with a solution growth rates in bank deposits will see its slowest pace in 10 years, which means liquidity will rise further and turn into a monumental problem.
The Fararu news website says bank deposits have an important role in attracting scattered liquidity among the people and it could be considered as a criterion to evaluate the performance of banks. The total volume of bank deposits which was 380 trillion rials (2.86 billion) in March 2002-03 has reached 15.6 quadrillion rials ($11.77 billion) in July of this year, indicating an increase of 4,005%.
Iranian banks did not have a lucky start in terms of deposits in the second half of the current decade starting March 20, 2016. During the March 2016-17 fiscal, the total volume of bank deposits reached a 16-digit figure, reaching 12.14 quadrillion rials ($93.4 billion).
The following year, March 2017-18, was not a good year for banks despite 22% growth in deposits year on year. However, that year saw long-term deposits breaking a record to reach 8.4 quadrillion rials ($63.39 billion), registering 73% growth YOY. This is while short-term deposits noticeably fell by 25% to 3.93 quadrillion rials ($29.66 billion).
This year deposits totaled 15.6 quadrillion rials ($120 billion) on July 22, indicating 5% growth compared with last year. If the current trend continues by the time the fiscal year ends, the volume of deposits will have declined by 15%, which is unprecedented in the past 10 years. This has pushed banks to double their efforts to attract deposits.