EghtesadOnline: The governor of the Central Bank of Iran says the total amount of loans to businesses by banks will reach 4.6 quadrillion rials ($146.8 billion) by the end of the current fiscal year in March.
“According to estimates, loans will amount to 4.6 quadrillion rials by the time the current fiscal year is out [March 2017],” Valiollah Seif was quoted as saying in Kerman by the official CBI website.
“Of this amount, 160 trillion rials ($5.1 billion) should be enough to get 7,500 small and medium-sized businesses going again. Given the total amount of loans, this will not be a huge sum and the banking system will be able to lend to efficient firms.”
As part of its plans to revive the flagging economy, the government has identified 7,500 production units for 160 trillion in new loans.
The CBI chief referred to the openings created in the aftermath of the nuclear deal with the six world powers, saying that Iranian banks no longer face restrictions similar to time when sanctions strangled the economy.
“It must also be mentioned that thanks to the efforts of our diplomats that helped the country make headway, the volume of exports doubled, the economy rebounded and the banking system managed to reestablish international banking relations,” he said.
Referring to the difficult times of the sanctions years, he said “Business dealings used to take place in dodgy black markets in the past. Now deals are made in the open and with transparency.”
The governor provided figures on banking transactions, saying that in the past year 25 billion interbank transactions were processed.
“The value of the transactions is 10 times the amount of cash available in the country and were conducted with total accuracy,” Seif said.
The head of the Money and Credit Council complained that the national economy for long has been bank-based, and stressed the role played by the banks in supporting economic projects.
“A key feature of the banking system is that its services are directed at people from all walks of life.” he said. “No project has taken off in the country without the banking system playing a role and 60-70% of funding for projects has come from the banking system.”
The former head of Iran Chamber of Commerce, Industries, Mines and Agriculture also met with Seif during his tour of the southeast city and complained about the unacceptably high interest rates banks charge businesses for their loans, according to Financial Tribune.
“Many loan applicants have to pay interest above 30% which can push them into bankruptcy as recession continues to bite,” Mohsen Jalalpour said as reported by the news website of ICCIMA.
“This trend (high rates) means that the loans will not be repaid and while locking up banking resources they will also lead lenders into bankruptcy that again will be a gross injustice to the private sector.”
The Money and Credit Council lowered lending rates in late June by two percentage points, requiring banks to lend at 18%. The decision came after banks had earlier agreed to bring their deposit rates down to 15% from the previous 18%.
Jalalpour said business owners are unaware of the real interest rates that the banks charge for the loans. Urging the banks to disclose the mechanisms on which they calculate loan rates.
Highlight: As part of its plans to revive the flagging economy, the government has identified 7,500 production units for 160 trillion in new loans
Caption: Many loan applicants have to pay interest above 30% which can push them into bankruptcy as recession continues to bite.