By the end of the fiscal month to December 21, total outstanding loans made by domestic banks crossed 17,409 trillion rials ($116 billion) -- up 23% annually.
The figure indicates 15.4% hike since the end of last fiscal year (ended March 2019) when total unpaid loans rose to 2,319.0 trillion rials ($15.56 billion), according to a report on the Central Bank of Iran website.
With 11,164.5 trillion rials ($74.93 billion), Tehran Province topped the list with the largest amount of outstanding loans.
At the bottom end of the list was Kohgilouyeh-Boyerahmad Province with total outstanding loans at 62.8 trillion rials ($421.47 million).
Deposits $165 Billion
Customers had 24,716.9 trillion rials ($165 billion) in deposits with banks and credit institutions during the period.
Deposits rose by 5,234.8 trillion rials ($35.13 billion) over the course of one year to post a 26.9% annual rise.
Deposits rose by 19.6% compared to the end of the last fiscal year when it was 20,673.4 trillion rials ($138.7 billion) in banks.
As usual deposits in banks in Tehran Province accounted for 53.8% of the total deposits. An estimated 13,295 trillion rials ($89.23 billion) in deposits were held in banks in the capital.
With more than 1,330.1 trillion rials ($8.92 billion) worth of deposits, Isfahan Province was next.
At the lowest end were banks in Kohgilouyeh-Boyerahmad Province with 65.4 trillion rials ($438.9 million).
Loan-to-Deposit Ratio
As seen in previous reports, the loan-to-deposit ratio (LDR) continued to decline in the new report reaching 78.5%.
This indicates 2.4% decline on a year-on-year basis and 2.8% drop compared to the end of last fiscal year.
The ratio has been of the descending order since the beginning of fiscal 2018-19, indicating the increasing unwillingness of banks to lend, according to a similar report by the Tehran Chamber of Commerce, Industries, Mines and Agriculture.
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.
The ratio was 85.7% in March 2018 and compared to the figure reported for last December, it shows a 7.5% decline.
TCCIM ascribes the decline in LDR to lenders’ increasing tendency to exercise extra 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 gave away all its deposits as loans to customers. 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 Iranian banking industry.
