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EghtesadOnline: Central Bank of Iran data show growth in deposits outpaced lending during the month to July 21. It reported that the gap between banks’ outstanding loans and deposits widened further by 9,338 trillion rials ($33 billion).

An estimated 30,586.2 trillion rials ($110b) in deposits were held by banks and credit institutions during the month. The amount includes lenders’ legal reserves.

The figure indicates growth of 8,421.1 trillion rials ($30b) or 38%, compared to the corresponding month last year. 

Total outstanding loans exceeded 21,248.23 trillion rials ($75b), indicating a 31.9% y/y growth.

Deducting banks’ legal reserves from their deposits, the gap between lending and deposit stood at 6,520 trillion rials in the month. 

Deposits on average have grown 3.3%% on a monthly basis during the first four months of current fiscal year (March 20- July 21), as per data compiled by the Tehran Chamber of Commerce, Industries, Mines and Agriculture. 

The growth in outstanding loans was slower in the  period averagely growing 2.4%. 

The gap also indicates the persistent decline in the loan-to-deposit ratio (LDR). With 4.5 percentage points decline annually, LDR stood at 76.5%. LDR also showed 2.9 percentage points drop in the first four months of the fiscal year. 

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 it is too low, the bank may not be earning as much as it should be.


LDR Declining 

Despite CBI recommendations to banks and credit institutions to balance the ratio, data of the past two years show overall LDR has been of the descending order.    

Published figures say the ratio was 85.7 in fiscal 2018-19. It has declined by 9.2 percentage points compared with the LDR in the latest report.  

The CBI report showed LDR was not consistent across all provinces.  The highest ratios were registered for Kohgilouyeh-Boyerahmad with 109% followed by Ilam Province and North Khorasan respectively with 105% and 102%. The lowest were in Bushehr Province with 36%. In Khuzestan Province it was 49% and Alborz Province 44%. The LDR in Tehran Province was 88.9%. 

Tehran Province also topped the list with the highest deposits with more than 16,808.1 trillion rials ($58.97 b) in deposits, accounting for 54.95% of the total.

Tehran was in first place as the province with the highest value of outstanding loans, crossing 13,712.4 trillion rials ($48.11b).

Inconsistencies in lending and deposits compelled the regulator in June to oblige provincial lenders to balance their loans with deposits. 

In June, the CBI instructed banks and credit institutions to increase their loan to deposit ratio in each province by at least 50%. 


Iran central bank lending Banks’ Deposits