EghtesadOnline: The Majlis has asked the government to eliminate the policy of compound interest rates in banks to help promote domestic production, and the Rouhani administration is expected to inform lawmakers about what it thinks of the prospect.
According to the parliamentary news website ICANA, Parliament Speaker Ali Larijani said the elimination of compound interest (the addition of interest to the principal sum of a loan or deposit) would be beneficial for Iranian banks and manufacturing companies because if banks receive their debts working capital and domestic production would pick up.
"The Central Bank of Iran should offer its informed opinion on the subject in the next few days, after which the MPs will make reforms based on the government perspective if necessary," Larijani said in a meeting with the Economy Minister Farhad Dejpasand, Minister of Industry, Mine and Trade Reza Rahmani, Agriculture Minister Mahmoud Hojjati, Minister of Cooperatives, Labour and Social Welfare Mohammad Shariatmadari, the chief of the Central Bank of Iran, Abdolnasser Hemmati and Plan and Budget Organization head Mohammad-Baqer Nobakht.
During a recent meeting, the senior lawmaker had discussed the issue with directors of government-owned banks and the economy minister, according to Financial Tribune.
Compound interest (or compounding interest) is interest calculated on the initial principal, which also includes all the accumulated interest of previous periods of a deposit or loan.