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EghtesadOnline: From the beginning of fiscal 2018-19 up until September, the loan-to-deposit ratio has been of the descending order indicating that banks are exercising extra caution when it comes to lending.

According to a report by the Tehran Chamber of Commerce, Industries, Mines and Agriculture, the ratio was 85.7 in 2018-19 fiscal year and dropped to 79.8 points in September. 

Compared to the end of the last fiscal year, the loan-to-deposit ratio fell 1.5%, indicating 4.5% decline on a year-on-year basis, according to Financial Tribune.

While the decline has not been consistent over two and a half years and has fluctuated ever since, the ratio shows an overall 6.4% fall during the period. 

LDR is used to assess a bank's liquidity by comparing total loans to total deposits for a specific period and is expressed in percentage.

If the ratio is too high, the bank may not have enough liquidity to cover unforeseen fund requirements. Conversely, if the ratio is too low, the bank may not be earning as much as it should be.

TCCIM ascribes the decline in LDR to lenders’ increasing tendency to err on the side of caution in lending given the piling up of non-performing loans, bad debts and the economic future riddled with uncertainty. 

As per acceptable norms, the ideal loan-to-deposit ratio is typically 80% to 90%. A loan-to-deposit ratio of 100% means a bank loaned an amount to customers the same amount it received in deposits. It also means the bank will not have enough reserves for contingencies. 

Citing banking and monetary experts, the TCCIM said a LDR ratio of 65 would be acceptable given the unhealthy state of the banking industry.    

LDR has not been consistent across regions in the country. The ratio ranged from 49.5 in Khuzestan Province to 106.6 for Kohgilouyeh-Boyerahmad Province. In Tehran Province it was 94 in mid-September. 

Deposits with Iranian banks and credit institutions have been rising over the past year to reach 23,493.9 trillion rials ($181.4 billion as per open market exchange rates) by the end of Sept 22, according to Central Bank of Iran.

Bank deposits increased by 5,435.9 trillion rials ($41.9 billion) over the course of the year, indicating a 30.1% rise annually and up 13.6% compared to figures reported for the end of the last fiscal year on March 19, 2019.

Approximately 12,799.9 trillion rials ($98.8 billion) in deposits were held with Tehran banks or 54.48% of the total deposits.


Outstanding Loans

According to the CBI, total outstanding loans rose from 13,637.9 trillion rials ($105 billion) at the end of sixth fiscal month of the previous year to 16,824.7 trillion rials ($129.5 billion) by the end of summer on Sept 22 -- up 23.4% annually.

Tehran Province topped the list with the highest number of defaults, reaching 10,919.3 trillion rials ($84.31 billion).

Next was Isfahan Province with 601.83 trillion rials ($4.64 billion). Khorasan Razavi Province was third with 517.48 trillion rials ($3.99 billion).

At the bottom end of the list was Kohgilouyeh-Boyerahmad Province with total outstanding loans reaching 58.5 trillion rials ($451.73 million).



Iran Loan-To-Deposit Ratio Banks lending Descending lend caution Unwilling